Budget and Fiscal Plan - Budget 2017 September Update › 2017_Sept_Update › bfp › 2017... · 2017-09-08 · B September 11, 2017 As required by Section 7(1)(d) of the Budget

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Budget 2017 Update2017/18 – 2019/20

September 11, 2017

National Library of Canada Cataloguing in Publication DataBritish Columbia.Budget and fiscal plan. –- 2002/03/2004/05-AnnualAlso available on the Internet.Continues: British Columbia. Ministry of Finance andCorporate Relations. Budget ... reports. ISSN 1207-5841ISSN 1705-6071 = Budget and fiscal plan — British Columbia.1. Budget — British Columbia — Periodicals. 2. BritishColumbia — Appropriations and expenditures — Periodicals.I. British Columbia. Ministry of Finance. II. Title.HJ12.B742 352.48’09711’05 C2003-960048-3

Budget 2017 Update – 2017/18 to 2019/20

TABLE OF CONTENTSBudget 2017 Update – 2017/18 – 2019/20 September 11, 2017

Attestation by the Secretary to Treasury Board

Summary ........................................................................................................................................................... 1

Part 1: Three Year Fiscal PlanIntroduction ....................................................................................................................................................... 5Revenue ............................................................................................................................................................. 9

Change from Budget 2017 ..................................................................................................................... 9Budget 2017 Update .............................................................................................................................. 10Major Revenue Sources ......................................................................................................................... 12

Expense .............................................................................................................................................................. 20Consolidated Revenue Fund Spending ................................................................................................... 20

Improving Affordability ................................................................................................................. 21Enhancing Services for British Columbians ................................................................................... 22Building a Strong and Sustainable Economy .................................................................................. 27

Full-Time Equivalents for the BC Public Service .................................................................................... 29Recovered Expenses ................................................................................................................................ 30Operating Transfers ................................................................................................................................ 31Service Delivery Agency Spending .......................................................................................................... 31

Capital Spending ................................................................................................................................................ 31Taxpayer-supported Capital Spending ................................................................................................... 31Self-supported Capital Spending ............................................................................................................ 38Projects over $50 million ....................................................................................................................... 38

Provincial Debt ................................................................................................................................................... 43Risks to the Fiscal Plan ........................................................................................................................................ 46Tables:

1.1 Three Year Fiscal Plan .................................................................................................................. 51.2 Three-Year Fiscal Plan Update – Changes from Budget 2017 (February 21st) ............................... 61.3 Revenue Changes from Budget 2017 ........................................................................................... 91.4 Incremental Tax and Revenue Measures from Budget 2017 .......................................................... 91.5 Comparison of Major Factors Underlying Revenue ..................................................................... 111.6 Personal Income Tax Revenue ..................................................................................................... 121.7 Corporate Income Tax Revenue .................................................................................................. 131.8 Sales Tax Revenue ........................................................................................................................ 131.9 Federal Government Contributions ............................................................................................. 161.10 Revenue by Source ...................................................................................................................... 181.11 Expense by Ministry, Program and Agency .................................................................................. 191.12 New Consolidated Revenue Fund Spending Priorities for Budget 2017 Update ........................... 201.13 Improving Affordability ............................................................................................................... 221.14 Enhancing Services ...................................................................................................................... 23

ii Table of Contents

Budget 2017 Update – 2017/18 to 2019/20

1.15 Federal Health Funding Agreement – Funding Breakdown ......................................................... 261.16 Building a Strong and Sustainable Economy .............................................................................. 271.17 Capital Spending ........................................................................................................................ 321.18 Provincial Transportation Investments ....................................................................................... 361.19 Capital Expenditure Projects Greater Than $50 Million ............................................................. 391.20 Provincial Debt Summary ........................................................................................................... 431.21 Provincial Borrowing Requirements ............................................................................................ 451.22 Reconciliation of Summary Results to Provincial Debt Changes ................................................. 461.23 Key Fiscal Sensitivities ................................................................................................................ 46

Topic Boxes:Fiscal Sustainability Review .................................................................................................................. 51Wildfire Management ........................................................................................................................... 55Impacts and Outlook for Softwood Lumber Dispute on British Columbia and the United States ......... 56

Part 2: Tax MeasuresTax Measures – Supplementary Information ..................................................................................................... 60

Tables:2.1 Summary of Tax Measures ............................................................................................................ 592.2 Impact of Medical Services Plan Premium Changes ..................................................................... 64

Topic Boxes:Climate Action and Carbon Pricing ...................................................................................................... 67Medical Services Plan Premiums .......................................................................................................... 70

Part 3: British Columbia Economic Review and OutlookSummary ........................................................................................................................................................... 71British Columbia Economic Activity and Outlook ............................................................................................ 71

The Labour Market .............................................................................................................................. 72Consumer Spending and Housing ........................................................................................................ 73Business and Government .................................................................................................................... 75External Trade and Commodity Markets .............................................................................................. 76Demographics ...................................................................................................................................... 77Inflation ............................................................................................................................................... 77

Risks to the Economic Outlook ........................................................................................................................ 78External Outlook .............................................................................................................................................. 79

United States ......................................................................................................................................... 79Canada .................................................................................................................................................. 81Asia ....................................................................................................................................................... 83Europe .................................................................................................................................................. 84

Financial Markets .............................................................................................................................................. 84Interest Rates ......................................................................................................................................... 84Exchange Rate ....................................................................................................................................... 86

Table of Contents iii

Budget 2017 Update – 2017/18 to 2019/20

Tables:3.1 British Columbia Economic Indicators ........................................................................................ 723.2 US Real GDP Forecast: Consensus versus Ministry of Finance ..................................................... 813.3 Canadian Real GDP Forecast: Consensus versus Ministry of Finance ........................................... 833.4 Private Sector Canadian Interest Rate Forecasts ............................................................................. 853.5 Private Sector Exchange Rate Forecasts ......................................................................................... 863.6.1 Gross Domestic Product: British Columbia ................................................................................. 873.6.2 Selected Nominal Income and Other Indicators: British Columbia ............................................. 883.6.3 Labour Market Indicators: British Columbia ............................................................................... 883.6.4 Major Economic Assumptions .................................................................................................... 89

Topic Box:The Economic Forecast Council, Budget 2017 Update ........................................................................... 90

Part 4: 2017/18 First Quarterly Report

2017/18 – Results to June 30, 2017 .................................................................................................................... 93

Tables:4.1 2017/18 Operating Statement ...................................................................................................... 934.2 2017/18 Revenue by Source .......................................................................................................... 944.3 2017/18 Expense by Ministry, Program and Agency ..................................................................... 954.4 2017/18 Expense by Function ...................................................................................................... 964.5 2017/18 Capital Spending ............................................................................................................ 974.6 2017/18 Provincial Debt ............................................................................................................... 984.7 2017/18 Statement of Financial Position ....................................................................................... 99

Appendix ........................................................................................................................................................... 101

Budget 2017 Update – 2017/18 to 2019/20

September 11, 2017

As required by Section 7(1)(d) of the Budget Transparency and Accountability Act, and Section 4(a)(v) of the Carbon Tax Act, I confirm that Budget 2017 Update contains the following elements: • Fiscal forecasts for 2017/18 to 2019/20 (provided in Part 1) and economic forecasts for 2017 to 2021 (provided in Part 3). • A report on the advice received from the Economic Forecast Council in July 2017 on the economic growth outlook for

British Columbia, including a range of forecasts for 2017 and 2018 (see Part 3, page 90). • Material economic, demographic, fiscal, accounting policy and other assumptions and risks underlying Budget 2017 Update

economic and fiscal forecasts. In particular: − The economic forecast reflects stable economic growth for British Columbia in an uncertain global economic

environment. US fiscal and trade policy uncertainty weighs on the North American outlook. In addition, there are ongoing economic challenges in Asia and Europe and risks related to monetary policy tightening. Accordingly, the economic projections assumed in Budget 2017 Update are prudent relative to the average of the forecasts provided by the Economic Forecast Council.

− Personal and corporate income tax revenue forecasts include the preliminary 2016 income tax assessments and the latest projections for national corporate taxable income received from the federal government.

− Natural gas royalty forecasts continue to adopt a lower natural gas price forecast compared to the private sector average in order to maintain prudence against volatility.

− The economic and revenue forecasts do not incorporate any impacts related to the US-Canada softwood lumber dispute or negotiations under the North American Free Trade Agreement.

− Budget 2017 Update does not include any impacts related to the BC Utilities Commission review of Site C. − Budget 2017 Update includes the impacts of government’s decision to cancel tolls on the Port Mann bridge and initial

costs in 2017/18 and 2018/19 related to the negotiation of the replacement of tolls on Golden Ears bridge. − Several ministry budgets include base increases for the final costs arising from the 2014 Economic Stability Mandate, as

virtually all contracts expire by June 2019. Budget 2017 Update does not incorporate any funding or cost estimates for a new mandate for public sector negotiations. Any costs from further Economic Stability Dividend payments will be managed from within the fiscal plan.

− Budget 2017 Update includes $521 million to fund the final Memorandum of Agreement with the BC Teachers’ Federation, incremental to the amount included in Budget 2017, regarding the recent Supreme Court of Canada decision in relation to Bill 22. It is government’s understanding that this final Memorandum resolves all matters relating to the court’s determination.

− The fiscal plan includes three-year financial projections for school districts, post-secondary institutions and health authorities, as provided by the Ministries of Education, Advanced Education, Skills and Training, and Health, respectively, based on plans submitted to the ministries by those entities, and for the other service delivery agencies and the commercial Crown corporations.

− Forecast prudence totals $900 million in 2017/18, $600 million in 2018/19, and $700 million 2019/20, representing the sum of the Contingencies vote and the forecast allowance in each fiscal year.

• A Revenue Neutral Carbon Tax Report for 2015/16 and 2016/17, and the Revenue Neutral Carbon Tax Plan for 2017/18 to 2019/20 (see Part 2: Tax Measures, page 67).

To the best of my knowledge, the three-year fiscal plan contained in Budget 2017 Update conforms to the standards and guidelines of generally accepted accounting principles for senior governments as outlined in Note 1 of the 2016/17 Public Accounts. I would like to recognize staff in government ministries and agencies for their contribution to this document. I would like to especially acknowledge staff in the Ministry of Finance, whose professionalism, commitment and expertise were essential to the completion of this budget.

David Galbraith Associate Deputy Minister and Secretary to Treasury Board

Budget 2017 Update – 2017/18 to 2019/20

A New Vision for BC

Budget 2017 Update signals the first step in building a better province for all British Columbians. The update begins to address the three key commitments: improving affordability, enhancing critical services, and building a strong, sustainable, and innovative economy that creates jobs and works for everyone.

Improving Affordability

With Budget 2017 Update, government is taking immediate steps to contain costs and fees for citizens and businesses and make life more affordable, including:•new investments to support the construction and

operation of 2,000 modular housing units for the homeless as well as the construction of over 1,700 new units of affordable rental housing;

• the elimination of tolls on the Port Mann and Golden Ears bridges effective September 1, 2017;

•a 50 per cent reduction in Medical Services Plan premium rates for all British Columbians; and

•an increase of $100 per month for both income and disability assistance.

Enhancing Services

Budget 2017 Update provides funding to improve important services British Columbians value. These include new funding allocations for:• school districts to improve education outcomes

by implementing the final BC Teachers’ Federation settlement, in addition to amounts provided in Budget 2017;

•an immediate and evidence-based response to the fentanyl emergency;

•addressing social assistance caseload pressures;• seniors home care, and mental wellness and

addictions support from the federal government; and

• the Residential Tenancy Branch.

Building a Strong and Sustainable Economy

British Columbians benefit when government chooses to invest in the economy. Budget 2017 Update includes new investments that will assist with the development of a strong and sustainable economy for the people and businesses of the province. These include:• the restoration of free Adult Basic Education and

English Language Learning;

($ millions)Actual

2016/17

Budget Estimate 2017/18

Plan 2018/19

Plan 2019/20

Revenue ………………………………………………… 51,459 52,407 52,557 53,677 Expense …………….....…....………………..………… (48,722) (51,861) (52,029) (53,070) Forecast allowance …………………………………… - (300) (300) (350)

Surplus ........................………………………………… 2,737 246 228 257

Capital spending:Taxpayer-supported capital spending ………………… 3,659 4,956 4,855 4,814 Self-supported capital spending ……………………… 2,725 2,701 2,635 3,154

6,384 7,657 7,490 7,968 Provincial Debt:

Taxpayer-supported debt ……………………………… 41,506 44,853 47,031 48,642 Self-supported debt …………………………………… 24,377 21,624 22,509 23,764 Total debt (including forecast allowance) ………… 65,883 66,777 69,840 72,756

Taxpayer-supported debt to GDP ratio ……………… 15.8% 16.2% 16.4% 16.3%Taxpayer-supported debt to revenue ratio ………… 81.8% 87.8% 91.7% 93.0%

Economic Forecast: 2016 2017 2018 2019Real GDP growth ...................................................... 3.6% 2.9% 2.1% 2.0%Nominal GDP growth ................................................ 5.1% 5.1% 4.1% 4.0%

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Summary: BUDGET AND FISCAL PLAN – 2017/18 to 2019/20

Budget 2017 Update – 2017/18 to 2019/20

2 Summary

• the establishment of the Emerging Economy Task Force, the Innovation Commissioner, and the Fair Wages Commission;

•an increase in the earnings exemption for social assistance recipients; and

•new investments made for wildfire prevention and environmental values.

Commitments made in Budget 2017 Update are being funded by improved revenue forecasts over the fiscal plan period, as well as changes to key revenue sources, including increasing the:• individual income tax rate to 16.8 per cent from

14.7 per cent on taxable income over $150,000;•general corporate income tax rate to 12 per cent

up from 11 per cent; and•carbon tax rate by $5 per tonne of CO2

equivalent emissions per year for four years.

In addition, Budget 2017 Update is phasing out sales tax on electricity purchases by businesses, reducing the small business corporate income tax rate to 2 per cent from 2.5 per cent, as well as other measures.

Strong Economic Growth

The Ministry’s estimate for BC real GDP growth in 2016 and the outlook for 2017 are higher than what was projected in Budget 2017 as BC’s economy has performed better than expected. Stronger than anticipated consumer spending and export activity in the latter part of 2016 is primarily responsible for the upward revision to the Ministry’s real GDP estimate for 2016, from 3.0 per cent to 3.6 per cent growth. Meanwhile for 2017, year-to-date data for key indicators such as

employment, retail sales, housing starts and exports have exceeded expectations. As such, the Ministry’s forecast for BC real GDP growth of 2.9 per cent in 2017 is higher than the 2.1 per cent projected in Budget 2017. The outlook for BC’s economy for 2018 and beyond is relatively unchanged from the previous outlook as the balance of risks to the domestic and global economy remains largely unchanged.

The Ministry’s forecast for BC real GDP growth is 0.1 percentage point below the outlook provided by the Economic Forecast Council for 2017 and 0.2 percentage points below for 2018 and beyond. This prudence acknowledges the downside risks to the economic forecast and is one of the levels of prudence built into the fiscal plan.

Downside risks to BC’s economic outlook include:•uncertainty regarding US fiscal and trade policy;•potential for a slowdown in domestic and

Canadian economic activity;• faltering of Europe’s economic recovery as it faces

the challenges of the UK exiting the European Union and elevated sovereign debt;

• slower economic activity in Asia, particularly as China transitions to a consumer-driven economy, resulting in weaker demand for BC’s exports;

•potential for monetary policy tightening to dampen economic momentum; and

•exchange rate and commodity price uncertainty.

Capital Investments

Budget 2017 Update continues to deliver ongoing capital plan commitments, and makes new commitments to assist with housing affordability

3.6

2.9

2.1 2.0 2.0 2.0

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2.0

3.0

4.0

2016 2017 2018 2019 2020 2021

Ministry of Finance

Economic Forecast Council

BC real GDP(annual per cent change)

Prudent economic forecast

BC real GDP outlook

3.0

2.1 2.1 2.0

3.6

2.9

2.1 2.0

0.0

1.0

2.0

3.0

4.0

BC real GDP (annual per cent change)

2017 2019 - 2021

Budget2017

Budget2017

Update

2018

BC real GDP outlook

2016

Budget2017

Budget2017

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Budget2017

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Budget2017

Budget2017

Update

Budget 2017 Update – 2017/18 to 2019/20

Summary 3

initiatives totalling almost $500 million over four years. Taxpayer-supported infrastructure spending on hospitals, schools, post-secondary facilities, transit, and roads is forecast to be $14.6 billion over the three years.

These significant capital investments are needed to deliver critical services and contribute to a strong economy and will create jobs in communities across the Province.

Self-supported capital spending of $8.5 billion over three years, relating primarily to power generation projects, is $2.3 billion lower than Budget 2017 due to the cancellation of the procurement of the George Massey Tunnel Replacement project.

Debt Affordability

The Budget 2017 Update debt forecast reflects an improved outlook for the elimination of government’s operating debt by 2019/20 due in part to 2016/17 results carrying forward and stronger projected economic growth.

Taxpayer-supported capital debt is projected to end the fiscal plan period $1.4 billion higher than Budget 2017 due mainly to the onetime impact of the reclassification of Transportation Investment Corporation’s Port Mann bridge debt following the elimination of tolls. Despite this $3.5 billion onetime shift, government’s key debt affordability metric, the taxpayer-supported debt to GDP ratio remains relatively low compared to recent fiscal years, ending the fiscal plan period at 16.3 per cent. British Columbia’s strong and growing economy can support this onetime adjustment that improves affordability for British Columbians.

Risks to the Fiscal Plan

The main risks to the government’s fiscal plan include:• risks to the BC economic outlook, largely due

to the continued uncertainty surrounding global economic activity;

•assumptions underlying revenue, including Crown corporation net income forecasts, such as economic factors, commodity prices and weather conditions;

•potential changes to federal government allocations for health and social transfers and cost-sharing agreements, as well as impacts on provincial income taxes arising from federal government tax policy changes;

• future Economic Stability Mandate dividend costs;

•utilization rates for government services such as health care, children and family services, and income assistance;

• impacts of the expiration of the 2006 Softwood Lumber Agreement and negotiations of the North American Free Trade Agreement between Canada, the US, and Mexico; and

• the outcome of litigation, arbitrations, and negotiations with third parties.

To mitigate the risks to the fiscal plan, government incorporates four main levels of prudence in its projections:•government has included forecast allowances

throughout the three year period; $300 million in each of 2017/18 and 2018/19, and $350 million in 2019/20 to guard against volatility, including revenue changes;

• the fiscal plan includes a Contingencies vote allocation of $600 million in 2017/18, $300 million in 2018/19, and $350 million 2019/20, to help manage unexpected pressures and fund priority initiatives;

• the Ministry of Finance outlook for BC’s real GDP growth is lower than the outlook provided by the Economic Forecast Council (0.1 percentage point lower in 2017 and 0.2 percentage points lower in 2018); and

• the natural gas revenue forecast incorporates additional prudence by using a price forecast that is lower than the average of private sector forecasts.

Conclusion

Government has moved forward on a number of key commitments in Budget 2017 Update. Further commitments will be acted upon in Budget 2018, which will be the government’s first full budget and fiscal plan.

Budget 2017 Update – 2017/18 to 2019/20

Part 1: THREE YEAR FISCAL PLAN

Introduction

Budget 2017 Update signals the first step in building a better province for all British Columbians. The update begins to address the three key commitments that government made: improving affordability, enhancing critical services, and building a strong, sustainable, and innovative economy that creates jobs and works for everyone.

Budget 2017 Update presents a new vision for British Columbia where improved services and lower costs for families are funded by improving revenues resulting from British Columbia’s strong and diverse economy, as well as additional revenue measures.

Budget 2017 Update is an important first step in creating this new vision, with more work to be addressed in Budget 2018.

An overview of changes from Budget 2017 is provided in Table 1.2.


Government is working on improving affordability for families and businesses that live and work in British Columbia. With Budget 2017 Update, government is taking first steps to deliver reduced costs for citizens and businesses, including:• newinvestmentstosupporttheconstructionandoperationof2,000modularhousingunitsforthehomelessaswellastheconstructionofover1,700newunitsofaffordablerental housing;

• theeliminationoftollsonthePortMannandGoldenEarsbridgeseffectiveSeptember 1, 2017;

• anincreaseof$100permonthforbothincomeanddisabilityassistance;and• a50 per centreductiontotheMedicalServicesPlanpremiumrateforall

British Columbians.

Table 1.1 Three Year Fiscal Plan

($ millions)Actual

2016/17


Plan 2018/19

Plan 2019/20

Revenue ………………………………………………… 51,459 52,407 52,557 53,677 Expense …………….....…....………………..………… (48,722) (51,861) (52,029) (53,070) Forecast allowance …………………………………… - (300) (300) (350)

Surplus .......................…………………………………… 2,737 246 228 257

Capital spending:Taxpayer-supported capital spending ………………… 3,659 4,956 4,855 4,814 Self-supported capital spending ……………………… 2,725 2,701 2,635 3,154

6,384 7,657 7,490 7,968 Provincial Debt:

Taxpayer-supported debt ……………………………… 41,506 44,853 47,031 48,642 Self-supported debt …………………………………… 24,377 21,624 22,509 23,764 Total debt (including forecast allowance) ………… 65,883 66,777 69,840 72,756

Taxpayer-supported debt to GDP ratio ……………… 15.8% 16.2% 16.4% 16.3%Taxpayer-supported debt to revenue ratio ………… 81.8% 87.8% 91.7% 93.0%

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6 Three Year Fiscal Plan

Budget 2017 Update – 2017/18 to 2019/20

Table 1.2 Three-Year Fiscal Plan Update – Changes from Budget 2017 (February 21st)($ millions) 2017/18 2018/19 2019/20

Budget 2017 (February 21, 2017) ……………………………………………………… 295 244 223 First Quarterly Report forecast updates

Revenue changes:Taxation ......................................................................................................... 1,226 926 914 Natural resource …………………………………………………………………… 93 20 23 Other fees, licenses, investment earnings and miscellaneous ...................... 101 40 171 Federal government transfers …………………………………………………… 55 158 88 Commercial Crown operating results …………………………………………… 44 (127) (83)

1,519 1,017 1,113 Expense (increases) decreases:

Higher spending mainly for fire management and emergency programs …… (668) - - Compensation costs including Economic Stability Mandate ………………… (31) (183) (347) Changes in service delivery agency spending ………………………….……… (127) (218) (188)

(826) (401) (535) Total first Quarterly Report forecast updates …………………………………… 693 616 578

Budget 2017 Update new measuresNew revenue measures:

Revenues to fund enhanced services:Personal income tax …………………………………………………………… 32 219 172 Corporate income tax …………………………………………………...……… 103 313 334 Carbon tax …………………………………………………...………………… - 212 428 Other tax measures …………………………………………………………… 15 - -

Improving affordability:Medical Services Plan reduction ……………………………………………… (100) (400) (415)

Strong and sustainable economy:Increased tax credits – mainly Low Income Climate Action ………………… - (39) (39)

50 305 480 New priority investments:

Improving affordability:Eliminate Port Mann and Golden Ears bridge tolls ………………………… (224) (170) (137) Increase social assistance rates ……………………………………………... (104) (182) (186) New housing investments ……………………………………………………… (14) (75) (86)

Enhancing services:Funding for K–12 sector ………………………………………………………… (177) (231) (229) Fentanyl response and Therapeutics Initiative ……………………………… (67) (128) (129) Funding for social assistance caseload pressures ………………………… (16) (43) (63)

Strong and sustainable economy:Raise earnings exemptions for social assistance …………………………… (6) (7) (7)

Restore tuition-free Adult Basic Education/English Language Learning 1 … (19) TBD TBDEnhanced environmental stewardship of BC forests ……………………… (29) (51) (61) Other measures ………………………………………………………………… (2) (1) (1)

(658) (888) (899)

Increased Contingencies Vote …………………………………………… (200) - (50) Reduced debt servicing costs …………………...………………………… 16 1 25

Total expense changes ………………………………………………………… (792) (582) (444)

Forecast allowance updates ………………………………………………………… 50 (50) (100)

Budget 2017 Update ……………………………………………………………………… 246 228 257 1 Additional assessment is required to finalize amounts beyond 2017/18.

Budget 2017 Update – 2017/18 to 2019/20

Three Year Fiscal Plan 7

Enhancing Services

Budget 2017 Update provides funding to enhance important services British Columbians value. These include new funding allocations for:• schooldistrictstoimproveeducationoutcomesbyimplementingthefinal

BC Teachers’ Federation settlement, in addition to amounts provided in Budget 2017;• animmediateandevidence-basedresponsetothefentanylemergency;• addressingsocialassistancecaseloadpressures;• seniorshomecare,andmentalwellnessandaddictionssupportfromthefederal

government; and• theResidentialTenancyBranch.


British Columbians benefit from a strong and vibrant economy when government chooses to invest in that economy. Budget 2017 Update includes new investments that will assist with the development of a growing and sustainable economy for the people and businesses of the province. These include:• therestorationoffreeAdultBasicEducationandEnglishLanguageLearning;• theestablishmentoftheEmergingEconomyTaskForce,theInnovation

Commissioner, and the Fair Wages Commission;• increasedearningsexemptionsforsocialassistancerecipients;and• newinvestmentsmadeforwildfirepreventionandenvironmentalvalues.

In addition to these new areas of focus, the Budget 2017 Update also accommodates $668 million in spending pressures mainly in the areas of fire management and emergency response, as well as an increase in the Contingencies Vote of $200 million to help manage unexpected pressures and fund new priorities in the 2017/18 fiscal year.

These new commitments and pressures are being funded by improved revenue forecasts over the fiscal plan period, as well as changes to key revenue sources, including increasing the:• individualincometaxrateto16.8 per centfrom14.7 per centontaxableincome

over $150,000;• generalcorporateincometaxrateto12 per cent;and• carbontaxrateby$5pertonneofCO2 equivalent emissions each year for four years.

In addition, your government is acting on measures that support a growing and sustainable economy. These include phasing out sales tax on electricity purchases by businesses, reducing the small business corporate income tax rate to 2.0 per cent from 2.5 per cent, as well as other measures.

Government’s taxpayer-supported capital spending over the fiscal plan period will total $14.6 billion, the highest level ever, reflecting infrastructure investments in transportation, education and health sectors, as well as new Budget 2017 Update commitments of almost $500 million in new housing investments.


Budget 2017 Update – 2017/18 to 2019/20

Capital investments by self-supported commercial Crown corporations will total $8.5 billion over three years primarily in relation to power generation projects. The total is $2.3 billion lower than February’s Budget 2017 due to the cancellation of the procurement for the George Massey Tunnel Replacement Project.

Government’s total debt is forecast to end the fiscal plan period at $72.8 billion. The taxpayer-supported debt growth mainly reflects investment in priority infrastructure projects in the sectors noted above, and a onetime shift in self-supported debt due to the reclassification of Transportation Investment Corporation’s Port Mann bridge debt as a result of the elimination of tolls. Within this overall balance, direct operating debt is projected to be eliminated by the end of 2019/20 for the first time since the mid 1970s.

Budget 2017 Update commitments are made with a continuing emphasis on responsible fiscal management. Government’s key debt metric, debt to GDP, remains low relative to recent fiscal years, and is forecast to fall from 17.1 per cent in 2015/16 to end the fiscal plan period at 16.3 per cent.

The major risks to the fiscal plan stem from changes in factors that government does not directly control. These include:• riskstotheBCeconomicoutlook,largelyduetothecontinueduncertainty

surrounding global economic activity;• assumptionsunderlyingrevenue,includingcommercialCrowncorporationforecasts,

such as economic factors, commodity prices and weather conditions;• futureEconomicStabilityMandatedividendcosts;• potentialchangestofederalgovernmenttransferallocations,cost-sharingagreements

with the federal government and impacts on the provincial income taxes arising from federal government tax policy and budget changes;

• utilizationratesforgovernmentservicessuchashealthcare,childrenandfamilyservices, and income assistance;

• impactsoftheexpirationofthe2006 Softwood Lumber Agreement and negotiations of the North American Free Trade Agreement between Canada, the US and Mexico; and

• theoutcomeoflitigation,arbitrations,andnegotiationswiththirdparties.

A complete discussion of the risks to the fiscal plan can be found beginning on page 46. Economic risks are discussed in Part 3: British Columbia Economic Review and Outlook.

Government incorporates four main levels of prudence in its projections to mitigate the risks to the fiscal plan:• governmenthasincludedaforecastallowancethroughoutthethreeyearperiod

– $300 million in each of 2017/18 and 2018/19, and $350 million in 2019/20 – to guard against volatility, including revenue changes;

• theContingenciesVoteallocationof$600 millionin2017/18,$300 millionin2018/19, and $350 million 2019/20, to help manage unexpected pressures and fund priority initiatives;

• theMinistryofFinanceoutlookforBC’srealGDPgrowthislowerthantheoutlookprovided by the Economic Forecast Council (0.1 percentage point lower in 2017 and 0.2 percentage points lower in 2018); and

• thenaturalgasrevenueforecastincorporatesadditionalprudencebyusingapriceforecast that is lower than the average of private sector forecasts.

Budget 2017 Update – 2017/18 to 2019/20


Revenue

Change from Budget 2017

Over the three year fiscal plan period, revenues are forecast to be $4.6 billion higher than the February estimates. This is a result of the effects of higher 2016/17 results, a stronger economic outlook, better than expected 2016 income tax assessment information, improved federal government contributions in support of homecare and mental health services (with an equal expense offset) and new policy measures introduced in Budget 2017 Update.

Higher revenues from most taxpayer-supported sources are partly offset by lower Medical Services Plan premiums and reduced net income of the commercial Crown corporations. Revenue improvements, including new policy measures introduced in Budget 2017 Update, have provided government the means to enhance critical services and improve affordability for British Columbians.

Tax and revenue measures in Budget 2017 Update that are new or have updated estimates total $0.8 billion over the three year period compared to Budget 2017. This includes $0.1 billion of higher tax transfer expenses (refundable tax credits) mainly due to increased low income climate action tax credits. More information on tax and revenue measures is detailed in Part 2: Tax Measures.

Table 1.3 Revenue Changes from Budget 20172017/18 2018/19 2019/20 Total

Personal income tax ……………………………………… (117) 287 310 480 Corporate income tax …………………………………… 890 644 619 2,153 Carbon tax ………………………………………………… 10 226 442 678 Medical Service Plan premiums ………………………… (74) (374) (388) (836) Sales taxes ………………………………………………… 257 209 235 701 Property transfer tax ……………………………………… 333 286 215 834 Natural resources ………………………………………… 93 20 23 136 Federal government contributions in support of

homecare and mental health services ………………… 39 111 144 294 Other taxpayer-supported sources ……………………… 94 79 115 288 Commercial Crown net income ………………………… 44 (127) (83) (166)

Total revenue changes …………………………………… 1,569 1,361 1,632 4,562

($ millions)

Table 1.4 Incremental Tax and Revenue Measures from Budget 20172017/18 2018/19 2019/20 Total

Personal income tax …………………………………………… 32 219 172 423 Corporate income tax …………………………………………… 103 313 334 750 Carbon tax ……………………………………………………… - 212 428 640 Medical Services Plan premiums ……………………………… (100) (400) (415) (915) Other taxes ……………………………………………………… 15 - - 15

Total revenue …………………………………………………… 50 344 519 913 Tax transfer expenses (mainly low income climate action) …… - (39) (39) (78)

Total changes ……………………………………………………… 50 305 480 835

($ millions)


Budget 2017 Update – 2017/18 to 2019/20

Personal income tax:• increasetheindividualincometaxrateto16.8 per centfrom14.7 per centontaxable

income over $150,000;• maintaineducationtaxcredit;• eliminatechildren’sfitness,children’sfitnessequipmentandchildren’sartstaxcredits

consistent with the elimination of federal fitness and arts credits; and• increasethedividendtaxcreditrateforenhanceddividends.

Corporate income tax:• increasethegeneralcorporateincometaxratefrom11 per centto12 per cent;• restorethepreferentialtaxbenefitforcreditunions;and• eliminatetheinternationalbusinessactivityprogram.

Carbon tax rates are increased by $5/tonne of CO2e each year for four years beginning April 1, 2018

Medical Services Plan premiums are reduced by 50 per cent for all British Columbians.

The low income climate action tax credit is increased effective April 1, 2018.

Other changes include adjustments to the effective dates for the increase to tobacco tax rates and the phasing out of provincial sales tax on electricity purchases.

Budget 2017 Update

Total revenue growth is expected to average 1.4 per cent annually over the three year period to 2019/20. Increasing revenues from taxation, federal government contributions and net income of commercial Crown corporations are partly offset by declining revenues from natural resources and Medical Services Plan (MSP) premiums.

27.1 28.2 29.3 30.3

2.7 2.4 2.3 2.2

11.0 10.4 9.5 9.6

8.2 8.4 8.6 8.7

2.5 3.0 2.9 2.9

2016/17 2017/18 2018/19 2019/20

Natural Resources

Taxation Revenue

OtherRevenue

Commercial Crown Net Income

$52.41.7%

Federal Contributions

Total revenueAnnual % change

$52.60.4%

$53.72.1%

$51.58.1%

$ billionsChart 1.1 Revenue forecast

Budget 2017 Update – 2017/18 to 2019/20


Over the three year fiscal plan period, taxation revenue is forecast to average 3.8 per cent annual growth as the effects of stable economic growth and tax policy measures are partly offset by an assumed 6.8 per cent average annual decline from property transfer tax revenue. From 2017 to 2019, the average annual growth in nominal GDP and real GDP is forecast at 4.4 per cent and 2.3 per cent, respectively.

Natural resource revenues are forecast to average a 6.6 per cent annual decline over the three years. This mainly reflects declining revenues from bonus bids and rents on drilling licences and leases, coal and forests, partly offset by rising natural gas royalties over the fiscal plan.

Other revenue consists of fees, licences, investment earnings and other miscellaneous sources. Over the ensuing three years, these revenues are projected to decline 4.4 per cent annually, on average, mainly due to government’s decision to improve affordability by reducing MSP premiums for all British Columbians. More information on MSP premium changes can be found in the Medical Services Plan Premiums topic box on page 70.

Excluding MSP premiums, over the ensuing three years, average annual growth in revenue from fees and licences, investment earnings and miscellaneous sources is expected to be relatively flat. The revenue forecast incorporates estimates provided by ministries and taxpayer-supported agencies.

Federal government contributions are forecast to average 2.3 per cent annual growth over the next three years mainly due to expected increases in the Canada Health Transfer (CHT) and the Canada Social Transfer (CST) disbursements. The combined CHT and CST contributions are forecast to average 3.3 per cent annual growth over the fiscal plan period, while other federal government transfers are projected to decline 2.0 per cent annually, on average.

Table 1.5 Comparison of Major Factors Underlying Revenue Calendar YearPer cent growth unless otherwise indicated 2016 2017 2018 2019 2016 2017 2018 2019

Real GDP …………………………………………… 3.6 2.9 2.1 2.0 3.0 2.1 2.1 2.0Nominal GDP ………………………………………… 5.1 5.1 4.1 4.0 4.7 4.1 4.0 3.9Household income ………………………………… 3.8 4.1 4.0 3.9 3.7 3.6 3.8 3.8Net operating surplus ……………………………… 11.2 9.1 2.8 2.8 8.5 5.0 2.4 3.0Consumer expenditures …………………………… 6.2 5.8 4.9 4.6 5.8 4.6 4.6 4.5Consumer expenditures on durable goods ……… 7.6 6.3 2.5 1.9 7.9 2.4 2.4 2.0Business investment ……………………………… 8.6 5.4 5.6 4.9 8.5 5.0 5.1 4.9Residential investment ……………………………… 15.3 6.6 6.4 4.9 15.4 6.1 5.3 4.9Retail sales …………………………………………… 7.4 5.9 4.0 3.6 6.3 3.7 3.7 3.6Employment ………………………………………… 3.2 3.1 1.2 1.1 3.2 1.2 1.2 1.1BC Housing starts …………………………………… 33.1 -8.5 -20.8 -10.9 33.1 -28.4 -8.2 -2.0US Housing starts …………………………………… 5.6 1.8 0.4 0.0 4.9 -0.5 3.4 0.0 SPF 2x4 price ($US/thousand board feet) ……… $308 $377 $360 $340 $308 $326 $318 $300Pulp ($US/tonne) …………………………………… $804 $858 $835 $803 $803 $806 $800 $800Exchange rate (US cents/Canadian dollar) ……… 75.4 76.3 77.3 78.8 75.4 73.7 75.3 78.4

Fiscal Year 2016/17 2017/18 2018/19 2019/20 2016/17 2017/18 2018/19 2019/20

Natural gas price ($Cdn/GJ at plant inlet) ………… $1.19 $1.60 $1.68 $1.78 $1.22 $1.61 $1.53 $1.73Bonus bid average bid price per hectare ($) ……… $546 $1,956 $160 $200 $163 $140 $160 $200Electricity price ($US/mega-watt hour, Mid-C) …… $24 $24 $24 $25 $24 $27 $25 $27Metallurgical coal price ($US/tonne, fob west coast) … $161 $145 $120 $116 $141 $140 $113 $110Copper price ($US/lb) ……………………………… $2.34 $2.56 $2.60 $2.72 $2.26 $2.38 $2.48 $2.61

Crown harvest volumes (million cubic metres) …… 59.5 58.0 59.0 59.0 58.5 59.0 60.0 60.0

February 21, 2017September 11, 2017


Budget 2017 Update – 2017/18 to 2019/20

Commercial Crown corporation net income is expected to average 4.5 per cent annual growth over the three year fiscal plan reflecting relatively stable growth in net income for BC Hydro and the Liquor Distribution Branch, lower losses expected for ICBC compared to 2016/17 and no net income losses for Transportation Investment Corporation as a result of eliminating tolls on the Port Mann bridge. More details on commercial Crown corporation net income are provided beginning on page 17.

Major Revenue Sources

Key assumptions and sensitivities relating to revenue are provided in Appendix Table A5. The assumptions and factors that are the major drivers for preparing projections of individual revenue sources include sensitivities to provide the reader with a sense of potential impacts to revenue projections if there are changes to these underlying assumptions and factors. The following text references the forecasts of these assumptions and factors in explaining individual revenue sources. An analysis of historical volatility of the economic variables related to revenue sources can be found in the 2017 BC Financial and Economic Review (pages 14-15). The major revenue components are detailed below.

Taxation revenue

Personal income tax base revenue (excluding tax measures and adjustments for prior years) is forecast to average 4.6 per cent annual growth over the ensuing three years, consistent with Budget 2017 Update projections of household and employee compensation income growth.

Personal income tax revenue is expected to decrease 6.7 per cent in 2017/18 mainly due to the effects of prior-year adjustments in 2016/17 and relatively weak preliminary 2016 tax assessment information. Over the next two years, revenue is projected to average 6.9 per cent annual growth, including impacts of increasing the individual income tax rate to 16.8 per cent from 14.7 per cent on taxable income over $150,000, effective January 1, 2018. The forecast also includes other tax measures relating to adjustments to the dividend tax credit rates and various personal tax credits.

Corporate income tax revenue is mainly based on cash instalments received from the federal government and settlement adjustments for prior years. The revenue forecast is expected to increase 43.3 per cent in 2017/18 due to increases in the settlement payment

Table 1.6 Personal Income Tax Revenue($ millions) 2016/17 2017/18 2018/19 2019/20

Base personal income tax revenue ………………………… 8,851 9,175 9,620 10,120 Measures:– Budget 2017 Update incremental tax measures: Increasing the individual income tax rate to 16.8 per cent on taxable income over $150,000 …… - 67 273 287 Other tax measures………………………………………… - (10) (28) (89) – Federal Budget 2017 tax measures ………………………… - (17) (8) (5) – Budget 2017 tax measures …………………………………… - 11 28 28 Prior-Year adjustment ............................................................. 853 (173) - -

Budget 2017 Update revenue .............................................. 9,704 9,053 9,885 10,341 Annual growth ……………………………………………………… 15.8% -6.7% 9.2% 4.6%Household income growth (calendar year) …………………… 3.8% 4.1% 4.0% 3.9%Employee compensation income growth (calendar year) …… 4.3% 4.7% 4.2% 4.0%Elasticity1 (calendar year basis, policy neutral) ………………… 0.8 1.3 1.2 1.21 Per cent growth in current year tax relative to per cent growth in personal income.

Budget 2017 Update – 2017/18 to 2019/20


for prior years and higher instalments. These increases reflect strong preliminary 2016 tax assessment information, improved federal government projections of national corporate taxable income and a higher BC payment share. Average annual growth over the next two years is forecast to decline 2.0 per cent as increases in instalments and the effects of the tax measures are offset by lower prior-year settlement payments.

Revenue projections assume the reduction of the small business income tax rate to 2.0 per cent from 2.5 per cent, effective April 1, 2017, and an increase in the general corporate income tax rate to 12 per cent from 11 per cent, effective January 1, 2018. BC corporate income tax entitlement is forecast to rise in line with the economic projections of net operating surplus of corporations.

Provincial sales tax revenue growth is expected to average 4.3 per cent annually over the three year fiscal plan, in line with expected increases in nominal GDP and consumer expenditures on taxable goods and services. The forecast incorporates a two-year phase out of tax applied to electricity purchases to help businesses become more competitive and support increased investment, growth and job creation. The forecast assumes that the tax rate on electricity purchases is reduced to 3.5 per cent from 7.0 per cent during 2017/18 and effective April 1, 2019, electricity purchases are fully exempt from provincial sales tax. This is expected to reduce revenue by $164 million once fully implemented in 2019/20.

Carbon tax revenue is forecast to average 11.6 per cent annual growth over the three years to 2019/20. The forecast incorporates an increase in carbon tax rates of $5 per tonne of CO2 equivalent emissions each year beginning April 1, 2018. The forecast assumes that purchased volumes of natural gas will grow in line with real GDP and that consumption of gasoline will remain flat. For more details on carbon tax, see the Climate Action and Carbon Pricing topic box on page 67.

Table 1.7 Corporate Income Tax Revenue($ millions) 2016/17 2017/18 2018/19 2019/20

Advance instalments from the federal government:– Payment share ………………………………………… 11.6% 12.5% 13.3% 13.4%– Instalments ……………………………………………… 2,727 3,594 3,649 3,752 – less small business income tax rate measure .......... - (79) (81) (81) – add general income tax rate measure ...................... - 106 302 322

International Business Activity Act refunds ……………… (19) (20) (15) (10) Prior-years' settlement payment ...................................... 295 702 257 152

Corporate income tax revenue ………………………… 3,003 4,303 4,112 4,135

Annual per cent growth ……………………………………… 7.8% 43.3% -4.4% 0.6%

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Table 1.8 Sales Tax Revenue2016/17 2017/18 2018/19 2019/20

Provincial sales taxes ............................................... 6,606 7,042 7,270 7,492

Annual per cent change (calendar year) 2016 2017 2018 2019

Durable goods …………………………………………… 7.6% 6.3% 2.5% 1.9%Consumer goods and services ………………………… 6.2% 5.8% 4.9% 4.6%Residential investment ………………………………… 15.3% 6.6% 6.4% 4.9%Government expenditures ……………………………… 5.5% 4.2% 2.0% 2.4%Nominal GDP …………………………………………… 5.1% 5.1% 4.1% 4.0%Retail sales ……………………………………………… 7.4% 5.9% 4.0% 3.6%

($ millions)


Budget 2017 Update – 2017/18 to 2019/20

Tobacco tax revenue is expected to grow by an average of 1.1 per cent annually over the three years of the fiscal plan. The forecast incorporates a tobacco tax rate increase of 0.8 cents per cigarette in 2017/18.

Property tax revenue is expected to grow by an average of 4.8 per cent annually over the three year plan, in line with the outlook for BC housing starts and inflation. The forecast incorporates the impact of increasing the threshold for the phase-out of the home owner grant to $1.6 million from $1.2 million for the 2017 tax year.

Property transfer tax revenue is forecast to decline 7.5 per cent in 2017/18 due to expected lower housing market activity compared to 2016/17. In the past, revenue projections were assumed to align with expected annual changes in BC housing starts. However, combined with volatility in the real estate market and stronger economic growth recently, this assumption has tended to underestimate revenues. Over the next two years, revenue is forecast to decline at a 6.5 per cent average annual rate, approximately half of the expected average annual decrease in BC housing starts. Revenue from the 15 per cent additional property transfer tax applied in Metro Vancouver is forecast at $200 million in each year of the fiscal plan.

More information on tax measures is detailed in Part 2: Tax Measures.

Natural resource revenue

Natural gas royalties are expected to increase 55.9 per cent in 2017/18 reflecting higher production volumes and prices for natural gas and natural gas liquids, including butane and pentane. Royalties are forecast to increase 29.5 and 16.3 per cent in 2018/19 and 2019/20 respectively, reflecting rising prices and production volumes, partly offset by increased utilization of royalty program credits.

The forecast assumes an average price of $1.60 ($Cdn/gigajoule, plant inlet) in 2017/18, up from $1.19 in 2016/17. This assumption is within the 20th percentile of the private sector forecasters, continuing the prudence incorporated since 2013/14. Prices are expected to increase over the next two years, averaging $1.68 in 2018/19 and $1.78 in 2019/20, consistent with the growth of the average of the private sector forecasts. Over

Chart 1.5 Revenue from Energy, Metals and Minerals

633

371272

182

152

237307

357

283

229124

117

231

219

223229

2016/17 2017/18 2018/19 2019/20

$ millions

Natural gas royalties

Other energy

Metals, mineralsand other

Sales/leases of Crown land drilling rights

Total1,056 926 8851,299

Chart 1.2 Revenue from energy, metals and minerals

Budget 2017 Update – 2017/18 to 2019/20


the three year fiscal plan period, the projected natural gas prices average 40 cents lower than the average of the private sector forecasters. Natural gas royalty rates are sensitive to prices in the $1.22 to $2.62 range. Hence the effective royalty rate is generally expected to rise as prices increase, depending on the take up of royalty program credits.

See Appendix Table A6 for more details regarding natural gas price forecasts.

Revenue from bonus bids and rents on drilling licences and leases is forecast to decline 71.2 per cent over the next three years, from $633 million in 2016/17 to $182 million in 2019/20. The decrease reflects declining deferred revenue over the three years and total cash sales expected at less than $10 million annually in 2018/19 and 2019/20. More detail is provided in Appendix Table A5.

Mining and minerals: Revenue from mineral tax, fees and miscellaneous mining receipts is expected to decline an average of 25.5 per cent annually over the ensuing three years mainly due to the impacts of assumed weakening coal prices and increased costs of production in coal mines, partly offset by the impacts of rising copper prices. Metallurgical coal spot prices rose significantly in the spring of 2017 reflecting short-term supply shortages resulting from cyclone activity in Australia that caused significant damage to rail infrastructure. Prices are forecast to decline over the forecast period as global production increases.

Other energy: Other energy revenue is comprised of electricity sales under the Columbia River Treaty, petroleum royalties and fees collected by the Oil and Gas Commission. These revenues are expected to decrease 5.2 per cent in 2017/18 due to the effects of lower assumed electricity prices and oil production. Annual revenue growth over the next two years is expected to average of 2.3 per cent due to the impacts of higher assumed electricity and oil prices.

Forests revenue is expected to decline an average of 2.6 per cent annually over the three years of the fiscal plan mainly reflecting lower overall stumpage rates. Total harvest levels on Crown land are projected to remain relatively flat, averaging 59 million cubic meters over the three year fiscal plan period.

Other natural resource revenue is comprised of water rentals and fees for hunting and fishing licences collected under the Wildlife Act. These sources are expected to decline 6.4 per cent in 2017/18 reflecting lower water rentals collected under the Water Sustainability Act, followed by an annual average increase of 1.6 per cent over the next two years mainly due to higher water rentals.

Other revenue

Medical Services Plan premiums (MSP): Budget 2017 Update signals government’s intention to eliminate MSP premiums within four years. The timing and structure of the change will be influenced by the report from a task force to be established in the fall of 2017 to provide advice and recommendations on how best to replace MSP premium revenue.

As a first step, MSP premiums will be reduced by 50 per cent for all British Columbians effective January 1, 2018. As a result, revenue to government from MSP premiums is forecast to decline 12.1 per cent in 2017/18 and a further 40.2 per cent in 2018/19. More information on MSP premium changes can be found in the Medical Services Plan Premiums topic box on page 70.


Budget 2017 Update – 2017/18 to 2019/20

Other fees and licences: Over the three year fiscal plan, revenue from other fees and licences is expected to average 2.6 per cent annual growth mainly due to increasing fee revenue collected by post-secondary institutions.

Investment earnings are expected to average a 1.1 per cent annual decline over the ensuing three years mainly due to lower recoveries through the fiscal agency loan program. Declining revenue from these recoveries has an equal and offsetting lower expense resulting in no net impact on the projected annual surpluses.

Miscellaneous revenue is projected to average a 4.4 per cent annual decline over the fiscal plan due to lower projected gains from the sale of surplus properties and the impact of the completion of the non-profit asset transfer program. The Provincial Rental Housing Corporation’s net income is expected to decline with the finalization of the transfer of selected lands and buildings to non-profit societies in support of building housing capacity. Excluding these items, growth in other miscellaneous revenue is projected to average 0.7 per cent annually over the three years.

Federal government transfers

Canada Health Transfer and Canada Social Transfer contributions are expected to average 3.3 per cent annual growth over the three years of the fiscal plan, mainly reflecting national cash transfers and a rising BC population share. The plan assumes the national Canada Health Transfer (CHT) cash disbursement increases 3.0 per cent in 2017/18 followed by increases of 3.4 per cent and 3.9 per cent in the last two years of the plan. The national CHT cash disbursement in 2017/18 is based on a three year average (2015 to 2017) of Canada’s nominal GDP growth, subject to a minimum annual growth rate of 3.0 per cent. The national Canada Social Transfer (CST) cash disbursement is projected to increase 3.0 per cent annually, consistent with the federal government forecast.

Other federal contributions are expected to average a 2.0 per cent decline annually over the fiscal plan. Reduced contributions include lower direct transfers in support of housing initiatives to the BC Housing Management Commission, reduced funding for disaster financial assistance and for other ministry programs. These are only partially offset by increased funding in support of homecare and mental health (with an equal and offsetting expense) and direct transfers to the BC Transportation Financing Authority in support of road and transit projects.

Table 1.9 Federal Government Contributions($ millions) 2016/17 2017/18 2018/19 2019/20

Canada Health Transfer …………………………………… 4,741 4,870 5,043 5,247 Deferred health equipment grants ………………………… 3 - - - Canada Social Transfer …………………………………… 1,751 1,802 1,859 1,917

Total health and social transfers ………………………… 6,495 6,672 6,902 7,164

Ministry cost recoveries …………………………………… 602 690 731 678 Transfers to post-secondary institutions ………………… 459 458 466 473 Transfers to taxpayer-supported Crown corporations … 295 301 218 186 Transfers to other SUCH sector agencies ……………… 106 95 90 90 Disaster financial assistance contributions ……………… 71 18 20 8 Other transfers ……………………………………………… 139 138 138 139 Total other contributions ................................................ 1,672 1,700 1,663 1,574

Total Federal Government Contributions …………… 8,167 8,372 8,565 8,738

Budget 2017 Update – 2017/18 to 2019/20


Commercial Crown corporations

British Columbia Hydro and Power Authority (BC Hydro): As required by regulation, BC Hydro’s net income is set at $698 million in 2017/18 and $712 million in each of 2018/19 and 2019/20. Pursuant to the 10 Year Rates Plan, BC Hydro forecasts include annual rate increases of 3.5 per cent for 2017/18, 3.0 per cent for 2018/19 and 2.6 per cent for 2019/20.

As part of the 10 Year Rates Plan, government is phasing out the payment of dividends by BC Hydro starting in 2017/18 to assist with stabilizing rate increases and improve BC Hydro’s capital structure to a 60:40 debt to equity ratio.

British Columbia Liquor Distribution Branch: The Liquor Distribution Branch’s net income is projected to average $1,111 million over the fiscal plan period, based on an average annual growth of 2.5 per cent in net sales revenue.

British Columbia Lottery Corporation (BCLC): BCLC reflects moderate net income growth over the fiscal plan period, from $1,301 million in 2017/18 to $1,329 million by 2019/20. Growth in net income is mainly attributed to a continued focus on innovation to retain existing players by supporting and enhancing existing products and to broaden the player base and engage new demographics of players by developing new content and experiences. The corporation continually manages costs and looks for ways to operate the business more efficiently and effectively.

For each year of the fiscal plan, government will distribute approximately $255 million (or approximately 20 per cent of the distribution paid to government) of its gaming income to charities and local governments. This distribution is $5 million more per year than Budget 2016. As well, $147 million of the gaming income retained by government will be allocated each year to the Health Special Account in support of health services.

Insurance Corporation of British Columbia (ICBC): Budget 2017 Update reflects continuing increased accident and claims cost trends resulting in growing net losses over the fiscal plan period. Government is continuing to review potential claims management strategies with the corporation, which also includes a review of ICBC’s own operations and practices. A further update will be included in Budget 2018.

Transportation Investment Corporation (TI Corp): As announced on August 25, 2017, government has eliminated tolls on the Port Mann bridge effective September 1, 2017. This loss in revenue has resulted in the subsequent reclassification of TI Corp from a self-supported commercial Crown corporation to a taxpayer-supported agency effective September 1, 2017 and the extinguishment of the fiscal agency loan owed to government. As a result, only a pro-rata amount of TI Corp’s operating loss results are included in self-supported net income in 2017/18. Transition costs, ongoing maintenance and repair, and depreciation expenses are included in taxpayer-supported agency expenses after the transition date.

For more information relating to commercial Crown corporation plans please see Service Plans listed on the Budget 2017 Update website or the corporations’ respective websites.


Budget 2017 Update – 2017/18 to 2019/20

Table 1.10 Revenue by Source

Taxation revenuePersonal income ………………………………………………………………… 9,704 9,053 9,885 10,341 Corporate income ………………………………………………………………… 3,003 4,303 4,112 4,135 Sales 1 ……………………………………………………………………………… 6,606 7,042 7,270 7,492 Fuel ………………………………………………………………………………… 969 975 982 989 Carbon ……………………………………………………………………........... 1,220 1,228 1,462 1,697 Tobacco …………………………………………………………………………… 737 745 762 762 Property …………………………………………………………………………… 2,279 2,384 2,503 2,621 Property transfer ………………………………………………………………… 2,026 1,875 1,731 1,640 Insurance premium ……………………………………………………………… 549 575 585 600

27,093 28,180 29,292 30,277 Natural resource revenue

Natural gas royalties ……………………………………………………………… 152 237 307 357 Forests …………………………………………………………………………… 913 890 846 843 Other natural resources 2 ………………………………………………………… 1,646 1,286 1,097 1,010

2,711 2,413 2,250 2,210 Other revenue

Medical Services Plan premiums ……………………………………………… 2,558 2,248 1,345 1,361 Other fees and licences 3 ………………………………………………………… 3,655 3,814 3,884 3,946 Investment earnings ……………………………………………………………… 1,242 1,183 1,184 1,200 Miscellaneous 4 …………………………………………………………………… 3,508 3,238 3,089 3,067

10,963 10,483 9,502 9,574 Contributions from the federal government

Health and social transfers ……………………………………………………… 6,495 6,672 6,902 7,164 Other federal government contributions 5 ……………………………………… 1,672 1,700 1,663 1,574

8,167 8,372 8,565 8,738

Commercial Crown corporation net incomeBC Hydro ………………………………………………………………………… 684 698 712 712 Liquor Distribution Branch ……………………………………………………… 1,083 1,095 1,111 1,128 BC Lottery Corporation (net of payments to federal government) ………… 1,329 1,301 1,311 1,329 ICBC ……………………………………………………………………….……… (612) (225) (302) (411) Transportation Investment Corporation 6 ..................................................... (81) (31) - - Other 7 ……………………………………………………………………………… 122 121 116 120

2,525 2,959 2,948 2,878 Total revenue ……………………………………………………………………… 51,459 52,407 52,557 53,677 1 Includes provincial sales tax, HST/PST housing transition tax and harmonized sales tax related to prior years.2 Columbia River Treaty, Crown land tenures, other energy and minerals, water rental and other resources. 3 Post-secondary, healthcare-related, motor vehicle, and other fees. 4

5

6

7 Includes Columbia Power Corporation, BC Railway Company, Columbia Basin Trust power projects, and post-secondary institutions' self-supported subsidiaries.

($ millions)


Plan 2018/19

Plan 2019/20

Actual 2016/17

Includes reimbursements for healthcare and other services provided to external agencies, and other recoveries.

Includes contributions for health, education, community development, housing and social service programs, and transportation projects. Due to the cancelation of tolls on the Port Mann bridge, Transportation Investment Corporation has been reclassified from a commercial Crown corporation to a taxpayer-supported agency effective September 1, 2017.

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Budget 2017 Update – 2017/18 to 2019/20


Table 1.11 Expense by Ministry, Program and Agency

($ millions)Actual

2016/17 1


Plan 2018/19

Plan 2019/20

Office of the Premier …………………………………………………………… 10 11 11 11 Advanced Education, Skills and Training ................................................... 2,054 2,154 2,170 2,214 Agriculture ………………………………………………………………............ 87 85 86 86 Attorney General ........................................................................................ 577 534 540 541 Children and Family Development …………………………………………… 1,448 1,596 1,592 1,595 Citizens' Services ....................................................................................... 496 551 506 506 Education ………………………………………………………………………… 5,722 6,100 6,206 6,237 Energy, Mines and Petroleum Resources …………………………………… 63 97 58 58 Environment and Climate Change Strategy ………………………………… 159 173 160 158 Finance …………………………………………………………………………… 1,164 322 431 484 Finance – extinguishment of TI Corp fiscal agency loan 2 …………………… - 3,505 - - Forests, Lands, Natural Resource Operations and Rural Development …… 890 1,149 699 701 Health ……………………………………………………………………………… 17,943 18,897 19,566 20,234 Indigenous Relations and Reconciliation ……………………………………… 228 91 91 91 Jobs, Trade and Technology …………………………………………………… 107 121 102 102 Labour …………………………………………………………………………… 11 11 12 11 Mental Health and Addictions ………………………………………………… - 5 10 10 Municipal Affairs and Housing ………………………………………………… 1,016 690 645 646 Public Safety and Solicitor General ............................................................ 862 1,030 798 798 Social Development and Poverty Reduction .............................................. 2,738 3,105 3,268 3,315 Tourism, Arts and Culture ........................................................................... 134 138 138 138 Transportation and Infrastructure ……………………………………………… 818 843 849 849

Total ministries and Office of the Premier …………………………… 36,527 41,208 37,938 38,785 Management of public funds and debt ………………………………………… 1,138 1,250 1,318 1,291 Contingencies 3 ……………………………………………...…………………… 3 600 300 350 Funding for capital expenditures ……………………………………………... 957 1,591 1,800 1,435 Refundable tax credit transfers ……………………………………………...… 1,031 1,166 1,226 1,247 Legislative Assembly and other appropriations ……………………………… 140 179 137 137

Total appropriations ……………………………………………………… 39,796 45,994 42,719 43,245 Elimination of transactions between appropriations 4 ………………………… (15) (53) (54) (58) Prior year liability adjustments ………………………………………………… (117) - - -

Consolidated revenue fund expense ………………..………………………… 39,664 45,941 42,665 43,187 Expenses recovered from external entities …………………………….…… 2,917 2,967 2,967 2,956 Funding provided to service delivery agencies ........................................... (24,217) (25,314) (26,186) (26,286) Extinguishment of TI Corp fiscal agency loan 2 ……………………………… - (3,505) - -

Total direct program spending ………………..……………………………… 18,364 20,089 19,446 19,857 Service delivery agency expense:

School districts …………………………………………………………………… 6,055 6,415 6,544 6,586 Universities …………………………………………………............................. 4,370 4,668 4,798 4,912 Colleges and institutes …………………………………………………........... 1,213 1,258 1,280 1,293 Health authorities and hospital societies ……………………………………… 14,240 14,687 15,123 15,615 Other service delivery agencies ……………………………………………… 4,480 4,744 4,838 4,807

Total service delivery agency expense ………………………………… 30,358 31,772 32,583 33,213

Total expense …………………………………………………………………..... 48,722 51,861 52,029 53,070 1

2

3

4 Reflects payments made under an agreement where an expense from a voted appropriation is recorded as revenue by a special account.

Restated to reflect government's current organization and accounting policies.Budget 2017 Update provides statutory authority to extinguish the fiscal agency loan agreement between government and the Transportation Investment Corporation in response to the decision to cancel tolls on the Port Mann bridge. As a related party transaction, the expense and the corporation`s debt reduction are eliminated on consolidation resulting in no impact to operating results. 2016/17 actual Contingencies Vote amounts relate to ex gratia payments not allocated to specific ministries.


Budget 2017 Update – 2017/18 to 2019/20

Expense

Budget 2017 Update provides new ministry budget allocations of $1.8 billion over the three year fiscal plan in addition to increases included in Budget 2017. The update also addresses increases in costs for the ongoing fire management activities this summer, as well as remaining compensation pressures related to the 2014 Economic Stability Mandate. This new funding forms the basis of government’s shift in focus to enhanced services, improved affordability, and building a strong and sustainable economy for all British Columbians. Government is able to make these commitments within a balanced budget framework due to revenue improvements that flow from improvements in British Columbia’s economy as well as changes in revenue measures included in the update.

Consolidated Revenue Fund Spending

Budget 2017 Update emphasizes sharing the benefits of a strong provincial economy with those who contribute most to that economic strength – the citizens of BC. As such, this budget marks the beginning of a new approach to government’s fiscal planning that will see many investments to assist, in particular, middle and lower income British Columbians. While several such initiatives are contained in the Budget 2017 Update, more will follow in future budgets. The new initiatives being introduced at this time will:• improveaffordabilityofservices;• enhanceservicesforBritishColumbians;and• buildastrongandsustainableeconomy.

The aggregated increases to ministry budgets of each area of emphasis are contained in Table 1.12, which sum to over $1.8 billion over the three year fiscal plan period and are incremental to any measures contained in February’s Budget 2017, and exclude other types of costs incurred (e.g. foregone revenues) from the decisions relating to ending tolls on the Port Mann and Golden Ears bridges.

The costs and nature of each specific investment are also itemized in Tables 1.13, 1.14, and 1.16, accompanied by descriptions of the various measures. In addition, there is

Table 1.12 New Consolidated Revenue Fund Spending Priorities for Budget 2017 Update2017/18 2018/19 2019/20 Total

Budget 2016 – total Ministries and Office of the Premier 1 ………………………… 35,339 36,075 36,647 108,061

Budget 2017 priority investments ………………………………………………………… 1,309 1,248 1,289 3,846

Budget 2017 – total Ministries and Office of the Premier ………………………… 36,648 37,323 37,936 111,907

Budget 2017 Update new ministry budget allocations:– Improving Affordability …………………………………………………………………… 134 273 288 695 – Enhancing Services …………………………………………………………………...… 260 402 421 1,083 – Building a more Sustainable Economy ………………………………………………… 27 9 8 44 New government priorities CRF spending …………………………………………... 421 684 717 1,822

– Higher spending mainly for fire management and other emergencies ……………… 668 - - 668 – Statutory spending for TI Corp fiscal agency loan extinguishment ………………… 3,505 - - 3,505 – Compensation costs including Economic Stability Mandate ………………………… 31 183 347 561 – Lower Housing Priority Initiatives special account draws for HOME program ……… (65) (252) (215) (532)

Total Budget 2017 Update CRF spending changes ……………………………...… 4,560 615 849 6,024

Budget 2017 Update – total Ministries and Office of the Premier ………………… 41,208 37,938 38,785 117,931

Budget 2017 Update – Change from Budget 2016 ………………………………… 5,869 1,863 2,138 9,870

1 Restated to reflect governments current organization and accounting policies.

($ millions)

Budget 2017 Update – 2017/18 to 2019/20


incremental funding for caseload and contractual pressures, including compensation costs involving wage increases for all unionized employees and other eligible groups in the broader public sector in 2018/19 and 2019/20 under the five-year 2014 Economic Stability Mandate. There is also increased funding for social assistance caseload pressures and retroactive RCMP salary increases announced by the federal government in April 2017, which apply to the provincial police force. The reduction in funding requirements from the Housing Priority Initiatives Special Account for the Home Owner Mortgage and Equity (HOME) Partnership program is based on updated projections for the number and amount of loans expected over the next three years. The current projections are significantly lower than those included in February’s Budget 2017.


Increase to Social Assistance Rates

In July 2017, government announced an increase to all social assistance rates of $100 per month. This rate increase applies to both income assistance and disability assistance. The rate increase for income assistance will be the first in ten years. The rate increase for disability assistance is in addition to the $50 monthly increase provided in February’s Budget 2017.

The Budget 2017 Update provides an additional $472 million over three years, as shown in Table 1.13, to fund the social assistance rate increases of $100 per month, which will take effect in October 2017.

New Housing Investments

In support of government’s longer-term action plan on housing, Budget 2017 Update provides for new housing investments, which represent the initial steps taken to address homelessness and to make housing more affordable for British Columbians. These provincial investments will support the construction of over 3,700 housing units as part of government’s commitment to help build 114,000 units of housing over ten years, in partnership with local governments, the federal government, and the private and not-for-profit sectors.• Modular Supportive Housing: $172 million over three years will fund the operating

costs of 2,000 new modular units for housing the homeless, including 24/7 staffing and support services. These supportive housing units will be built at an estimated capital cost of $291 million in 2017/18 and 2018/19 and will be deployed across the Province.

• Affordable Rental Housing: Government will support the construction of over 1,700 new units of affordable rental housing in communities across the Province and for a wide variety of populations, including low-to-moderate income renters, seniors, and adults with developmental disabilities or mental health challenges. Less than $3 million over three years is required to fund operating costs because these housing projects will be run by not-for-profit societies that offset almost all operating costs through rental revenue. The government, through the BC Housing Management Commission, will make a total capital investment of approximately $208 million over four years towards the construction of these affordable rental housing units.


Budget 2017 Update – 2017/18 to 2019/20

Elimination of Tolling

Consistent with the government’s commitment, tolls on the Port Mann and Golden Ears bridges have been eliminated effective September 1, 2017. In the case of Port Mann, annual savings to the average commuter who had to utilize the bridge five days per week for work or other purposes amounts to over $1,500. From a business perspective, the savings for a commercial truck driver for the same amount of use is about $4,500 per year.

The estimated net cost impact to government from removing tolls on both bridges is $479 million over three years, as shown in Table 1.13. For Port Mann, the estimated costs include foregone toll revenue, toll termination costs incurred, net of long term administrative cost savings. This includes a $48 million reallocation of Port Mann maintenance costs transferred to the Ministry of Transportation and Infrastructure. The impact of removing tolls on the Golden Ears bridge for 2017/18 and a portion of 2018/19 includes the compensation to TransLink, the owner of the Golden Ears bridge, for foregone toll revenue. Negotiations between the provincial government and TransLink will determine additional future costs to the Province.

Table 1.13 also signals that the procurement of the $3.5 billion George Massey Tunnel Replacement Project has been cancelled, which is another crossing whose original mandate included tolling. Because there had been some early capital expenditures made in preparation for the proposed bridge, these must be written off, creating a $52 million expense in 2017/18. As government develops its revised transportation strategy for the Lower Mainland in cooperation with TransLink, a longer term plan for the current George Massey Tunnel will be undertaken.

Enhancing Services for British Columbians

A second key priority that government is emphasizing is improving key services for British Columbians as outlined in Table 1.14. Budget 2017 Update achieves this by making additional investments in the K–12 sector, health care and the response to the fentanyl emergency, and the addition of resources to the Residential Tenancy Branch.

K–12 Education

In November 2016, the Supreme Court of Canada issued a decision that the 2012 Education Improvement Act, which deleted almost 1,400 provisions across 60 collective agreements in B.C. school districts, violated the Charter of Rights

Table 1.13 Improving Affordability ($ millions) 2017/18 2018/19 2019/20 Total

Budget 2017 UpdateIncrease social assistance rates by $100/month ………………………………………… 104 182 186 472 New housing investments …………………………………………………………………… 14 75 86 175 Ministry of Transportation lift to fund Port Mann maintenance …………………………… 16 16 16 48

CRF spending increases ……………………………………………………………………. 134 273 288 695 Estimated costs associated with removing tolls …………………………………………… 156 154 121 431 Write-off of George Massey Tunnel Replacement Project costs ………………………… 52 - - 52

Total improving affordability ………...……………………………………………………… 342 427 409 1,178

Budget 2017 Update – 2017/18 to 2019/20


and Freedoms. As a consequence of that decision, the deleted provisions were restored triggering the Letter of Understanding 17 requiring the parties to bargain from the restored language, which involved complex negotiations. The resulting Memorandum of Agreement (MoA) includes limitations on staffing ratios, class size and composition standards, compliance measures, remedies, and dispute resolution processes. The final MoA was reached with the BCTF on March 3, 2017 and fully and finally resolves all matters related to the determination by the courts. The funding allocation is now known as the Classroom Enhancement Fund.

Therefore, in the Budget 2017 Update, a total of $521 million is added to the Ministry of Education’s budget over the next three years to provide for the Classroom Enhancement Fund costs, incremental to the amounts included in February’s Budget 2017. This funding, noted in Table 1.14, is estimated to provide for the hiring of 3,500 enrolling and non-enrolling teacher full-time equivalents (FTEs), an increase of 10 per cent over the current complement of approximately 35,000 teaching professionals. Capital funding of approximately $50 million has also been allocated to ensure that immediate space requirements for September 2017 are addressed as new classrooms are made available to accommodate the reduced class sizes.

Further, in fall 2015, after nearly two decades of decline, the number of students in BC schools began to increase. Since that time, over 10,000 new student FTEs have entered the K–12 system. The Budget 2017 Update provides $116 million over three years in new funding to the K–12 sector as shown in Table 1.14, of which $51 million is to fund the known February and May 2017 growth in public school student enrolment. The new funding is the base amount of enrolment funding required going

Table 1.14 Enhancing Services ($ millions) 2017/18 2018/19 2019/20 TotalBudget 2017 Update

Incremental annualized cost of final BCTF agreement on class size and composition ..….……………………………………………………………………… 137 193 191 521

Funding for actual 2016/17 enrolment growth and other K–12 pressures ……………… 40 38 38 116 New funding to Health & Mental Health ministries for the fentanyl emergency ………… 61 114 115 290 Additional funding for law enforcement and BC Coroners Service to respond

to the fentanyl emergency ………………………………………………………………… 6 13 13 32 Increase to ensure a $2 million budget for the Therapeutics Initiative ………………… 1 1 1 3 Addressing social assistance caseloads …………………………………………………… 14 40 60 114 Increase in budget for Residential Tenancy Branch ……………………………………… 1 3 3 7

CRF spending increases – total enhanced services ………...………………………… 260 402 421 1,083

February Budget 2017Base: $5,923



$177

$237 $267

2016/17 2017/18 2018/19 2019/20

Ministry of Education increases: Budget 2017 Update

3-year total increase versus February Budget 2017: $681 Million

$5,609

$6,100

$6,237$6,206

Budget 2016 base

($ millions)

Chart 1.3 Education budget increases


Budget 2017 Update – 2017/18 to 2019/20

into the 2017/18 school year. Government will continue to monitor enrolment going forward, ensuring that school districts have adequate funding to provide the appropriate educational services to students and will manage the cost of any incremental enrolment growth for the 2017/18 school year from within the fiscal plan.

In total, including $44 million over the fiscal plan period for K–12 wage increases negotiated under the 2014 Economic Stability Mandate, the Budget 2017 Update adds $681 million to the K–12 sector as shown in Chart 1.3.

Health Care and a Response to the Fentanyl Emergency

A total of $603 million over three years, is added to the health sector in Budget 2017 Update, beyond that provided in February’s Budget 2017 (see Chart 1.4). $290 million of this total is to address the fentanyl emergency, discussed further below. Most of the remainder is to address other pressures in the health care system, including wage pressures related to the 2014 Economic Stability Mandate. The three year average growth rate for the Ministry of Health in Budget 2017 Update is 4.0 per cent, compared to 3.6 per cent in February’s Budget 2017.

A public health emergency was declared on April 14, 2016, due to rapidly rising numbers of preventable opioid-related overdose deaths. Since then, illegal drug overdose deaths have continued to occur at unprecedented levels. The government has pledged to act to reduce the dire individual human and social costs that are attributable to the rapidly rising use of fentanyl and other similar drugs. Table 1.14 details additional funding provided in the Budget 2017 Update to address the issue - $265 million of the $290 million over three years is for the Ministry of Health. This funding will provide additional support to enhance the capacity of the health care system to respond to the increasing number of overdose deaths. There are many specific measures that will be continued, expanded, and established with this funding, which will begin to flow immediately, noting that health authorities have been expending considerable resources to battle the problem for some time. The funding will be used in the following ways:• Saving lives: A variety of measures, including overdose prevention services, supervised

consumption services, and take-home naloxone kits;

February Budget 2017

Base: $18,840


Base: $19,341


Base: $19,913

$57

$225

$321

2016/17 2017/18 2018/19 2019/20

Ministry of Health increases: Budget 2017 Update

3-year total increase versus February Budget 2017: $603 Million

$17,965

$18,897

$20,234

$19,566

Budget 2016 base

($ millions)

Chart 1.4 Ministry of Health budget increases

Budget 2017 Update – 2017/18 to 2019/20


• Focused Supports: Safe and supportive services for communities most impacted by the public health emergency such as First Nations and those using alone, continued support for young people to access mental health and addiction services provided through integrated services such as Foundry Centres, and provision of supports to first line responders;

• Provide Help Quickly When People Ask: Develop community substance use centres in locations most impacted by overdose crisis. There will also be additional education for physicians, pharmacists, nurse practitioners and other health care providers to ensure that these professionals have more up-to-date knowledge about prevention, minimizing and treating addiction disorders, as well as provision of pain management services. A wide variety of additional measures will also be provided including opioid use disorder treatments to help prevent withdrawal and reduce opioid cravings and ongoing funding for 60 new residential treatment beds and 50 intensive outpatient spaces; and

• Targeted Responses: Improve data collection and analysis in order to better identify those most at risk, more accurately target the most appropriate responses, and provide resources to monitor and improve the effectiveness of the services provided.

The Budget 2017 Update also follows through on the commitment to establish a Ministry of Mental Health and Addictions, with a budget of $25 million over three years. The key role of the new ministry is to provide strategic leadership in developing a seamless, coordinated mental health and addictions system. This will involve policy development, research, evaluation, and establishing partnerships with relevant organizations and government ministries. The new ministry will work closely with the Ministry of Health to develop the new programs and allocate the funding.

In addition to the health care aspects of the fentanyl response strategy, $32 million over three years is provided to the Ministry of Public Safety and Solicitor General for:• Increased Policing: Of the $32 million in funding, $25 million will augment police

resources to help disrupt the supply chain, provide more naloxone training, purchase the equipment necessary to help detect drug contamination, and protect police personnel from potential fentanyl exposure; and

• BC Coroners Service: $7 million will fund additional resources to address the extraordinary demand for services created by the significant increase in overdose deaths as a result of this public health emergency.

UBC Therapeutics Initiative

There was also a commitment by the government to reinstate funding to the UBC Therapeutics Initiative to $2 million annually. This is a team of medical professionals, associated with the University of British Columbia, which provides independent advice to the Ministry of Health on the effectiveness of new drugs being considered for inclusion within the Pharmacare program. While some funding is currently provided, the fiscal plan adds almost $3 million over three years to achieve the $2 million annual amount.


Budget 2017 Update – 2017/18 to 2019/20

Federal Agreement on Home and Community Care and Mental Health

The Government of Canada and the Province have agreed to new targeted federal funding for investments in home and community care and mental health care. Over the next 10 years, the federal government will provide British Columbia with an additional $1.4 billion dollars. In general terms, the funding is to:• fulfillunmetneedsinareassuchaspromotionofmentalwellnessandaddictions

treatment, especially for youth; and• giventheagingpopulationandincreasedincidenceofdementiaandotherage-related

chronic conditions, provide more supports so people can remain in their homes longer, access more non-hospital-based care, including palliative care if needed.

This federal funding for BC totals $294 million over the fiscal plan period, as detailed in Table 1.15 and will flow directly to the Ministry of Health rather than through general revenues.

The federal government also provided $10 million in a one time funding in 2017/18 in response for urgent support specifically for BC to help address the opioid emergency.

Funding for Social Assistance Caseloads

Since February’s Budget 2017, improved estimates are available for income assistance and disability assistance caseloads, and related supplementary benefits. As such, $114 million over three years is added to the budget of the Ministry of Social Development and Poverty Reduction to address caseload pressures.

Improving Services for Low-Income Families

Budget 2017 Update also includes $15 million over three years for the BC Healthy Kids Program, which will come from dedicated funding provided in February’s Budget 2017 for social policy initiatives. The BC Healthy Kids Program currently provides basic dental and optical care to children in low-income families. This funding will provide new hearing assistance benefits, including coverage for hearing aids, and improved rates for dental services. These program enhancements will take effect in September 2017.

In 2017/18, the social policy initiatives funding will also support the initial planning work needed to develop a comprehensive poverty reduction strategy, including a basic income pilot.

Supporting Children and Families in Need

The Budget 2017 Update includes $312 million over three years to start the rebuilding process necessary to strengthen our child protection and support systems, and begin responding to the recommendations from the Grand Chief Ed John Report on

Table 1.15 Federal Health Funding Agreement – Funding Breakdown ($ millions) 2017/18 2018/19 2019/20 TotalBudget 2017 Update

Improving access to home and community care………………………… 26 52 52 130 Additional home care infrastructure ……………………………………… - 26 33 59 Improving access to mental health and addictions services ………… 13 33 59 105 Public Safety Canada opioid overdose emergency funds …………… 10 - - 10

Total ………...…………………………………………………………… 49 111 144 304

Budget 2017 Update – 2017/18 to 2019/20


Indigenous Child Welfare. This funding will provide $147 million for the child protection system and services for children with special needs, $120 million to better support Indigenous families and children with culturally appropriate services, and $45 million for additional mental health resources for children and youth. These investments will also support the hiring of an additional 100 front-line support workers and more than 120 child and youth mental health workers in communities across the Province, in addition to the 300 front-line social workers added over the past two years.

Government is committed to helping children grow up in a safe environment, reducing the number of Indigenous children in care and supporting children aging out of care to thrive. This government will work in partnership with families, Indigenous communities, and other levels of government to meet our responsibility to protect and support British Columbia’s most vulnerable children.

Building an Affordable, Accessible, and Quality Child Care System

The Budget 2017 Update includes the additional $20 million provided in 2017/18 for new child care investments, which increases provincial funding for early childhood development and child care to $330 million this fiscal year. This funding will support up to 4,100 new child care spaces. Government will complete negotiations with the federal government on the Early Learning and Child Care agreement, investing an additional $50 million in child care spaces, supports, training, and programming. Over the next few months, government will work closely with the advocates and parents that have long sought a universal system of child care to develop a longer-term plan that will make accessible, affordable child care a reality for families in British Columbia.

Improving Services at the Residential Tenancy Branch

With rental vacancy rates at less than one per cent in many parts of the Province, secure housing is important and government needs to ensure that renters are treated fairly and that both renters and landlords understand their rights and responsibilities. The Budget 2017 Update will provide the Ministry of Municipal Affairs and Housing’s Residential Tenancy Branch with additional funding of $7 million over three years to address existing backlogs of landlord-tenant disputes, reduce wait times for dispute resolution and information services, and establish a dedicated unit to start investigating non-compliance with tenancy legislation.


The government is committed to building a strong, sustainable, and innovative economy that works for and benefits everyone. New economic initiatives included are outlined in Table 1.16.

Table 1.16 Building a Strong and Sustainable Economy ($ millions) 2017/18 2018/19 2019/20 TotalBudget 2017 Update

Increase earnings exemptions for social assistance recipients by $200/month ……… 6 7 7 20 Restore tuition-free Adult Basic Education and English Language Learning

to the K-12 and post-secondary sectors1 ………………………………………………… 19 TBD TBD 19 Emerging Economy Task Force, Innovation Commissioner, and

Fair Wages Commission …………………………………………………………………… 2 2 1 5 CRF spending increases ……………………………………………………………………. 27 9 8 44

Enhanced environmental stewardship – BC Forest Enhancement Society …………… 29 50 61 140

Total strong and sustainable economy ………...………………………………………… 56 59 69 184 1 Additional assessment is required to finalize amounts beyond 2017/18.


Budget 2017 Update – 2017/18 to 2019/20

Increasing Earnings Exemptions for those on Social Assistance

The Budget 2017 Update will allow for an increase to earnings exemptions of $200 per month for all categories of people receiving social assistance. This will mean that a family receiving income assistance will be able to earn a maximum of $600 per month on top of their monthly income assistance. A single person receiving disability assistance will be able to earn $12,000 per year on top of their monthly disability assistance. Earnings exemptions allow people on social assistance to work, earn money, build job skills and experience, and better support themselves and their families.

Budget 2017 Update provides $20 million over three years to fund the increase to earnings exemptions, which will take effect in October 2017.

Restoring Tuition-Free Adult Basic Education and English Language Learning Programming

As an outcome of Budget 2015, due to funding reductions, tuition fees were introduced by post-secondary institutions and school districts to fund Adult Basic Education (ABE) and English Language Learning (ELL) courses. This created a financial barrier to those adults interested in improving their literacy, numeracy, language, and academic skills in order to enter into more advanced education and training programs or enter the workforce. As of September 1, 2017, all adults, including those who have graduated from high school, can now enroll in approved post-secondary and K–12 ABE and ELL courses tuition free. While the uptake for this programming remains to be determined, $19 million is added to the Ministry of Advanced Education, Skills and Training budget for 2017/18. Due to the uncertainty regarding the future demand for course offerings, additional funding required, including those costs incurred by the Ministry of Education for school districts’ ABE courses, will be managed from Contingencies and addressed in future budgets.

Planning for an Innovative and Equitable Economy

The government is also fulfilling its commitment to immediately implement three additional initiatives to help plan the development of a more sustainable economy in BC; they are:• TheappointmentoftheInnovationCommissioner,whosemandateistobean

advocate and ambassador on behalf of the BC technology sector in Ottawa and abroad;

• EstablishinganEmergingEconomyTaskForcetoaddressthechangingnatureofbusiness over the next 10 to 25 years; and

• Appointinganat-arm’s-lengthFairWagesCommissiontoestablishapathwaytoaminimum wage of at least $15 per hour.

To signal government’s intent to move forward on each of these three initiatives, the Budget 2017 Update provides a total of $5 million over the fiscal plan period to facilitate their work, allocated between the Ministry of Jobs, Trade and Technology and the Ministry of Labour.

Forest Enhancement Society and Wildfire Prevention Investments

The Forest Enhancement Society is a relatively new Crown agency with a mandate to invest in projects involving wildfire prevention/mitigation, improvement of forest/habitat values and fibre usage, and treating forests to enhance carbon sequestration. Its current

Budget 2017 Update – 2017/18 to 2019/20


spending plan is sizable, totaling $140 million over three years as indicated in Table 1.16. Therefore given its resources and mandate, its contributions to preserving both key forest values, as well as achieving greenhouse gas objectives, are consistent with government’s goals of both a sustainable economy and environment.

A complementary investment, not shown in Table 1.16 because the expenditures are capital rather than operating, is $15 million over three years to upgrade BC Wildfire Service infrastructure, including up to 10 fire bases around the province.

United Nations Declaration on the Rights of Indigenous Peoples

As part of the government’s commitment to fully adopting and implementing the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and the Calls to Action of the Truth and Reconciliation Commission, government will work with Indigenous leaders to identify priority areas for reviews of ministry programming to ensure they are consistent with the declaration. This includes proposals for future budgets.

Full-Time Equivalents for the BC Public Service

Full-time equivalent (FTE) staff utilization in core government ministries is projected to increase from 27,940 FTEs in 2016/17 to 28,600 FTEs in 2017/18. This projected increase is due mainly to commitments made to increase the number of social workers, address service demands at the BC Coroners Service, improve records management as well as financial, residential tenancy, and real estate oversight, and increase the number of park rangers as well as support wildfire and other environmental management, compliance and enforcement activities.

FTE staff utilization is projected to increase slightly in 2018/19 due to the continued hiring of additional social workers, before stabilizing in 2019/20.

Public Sector Compensation: Managing the Final Costs for the 2014 Economic Stability Mandate

The 2014 Economic Stability Mandate (ESM) applies to all public sector employers with unionized employees whose collective agreements expired on or after December 31, 2013. There are more than 310,000 employees across the broader public sector now covered by five-year collective agreements, and the majority expire by June 2019, including

30,295

26,67927,192

27,94028,600 28,630 28,660

2001/02(Actual)

2014/15(Actual)

2015/16(Actual)

2016/17(Actual)

2017/18(Plan)

2018/19(Plan)

2019/20(Plan)

FTEs

Chart 1.9 BC Public Service FTEs

1

1 2001/02 FTE count has been restated to reflect the 2011/12 transfer of approximately 3,200 BC Ambulance Service FTEs from theMinistry of Health to the Provincial Health Services Authority.

Chart 1.5 BC public service FTEs


Budget 2017 Update – 2017/18 to 2019/20

individuals working in the public service, at Crown corporations, in K–12 education, post-secondary, health and community social services. Wage lifts were negotiated as two staggered increases during each year, resulting in incremental wage pressures in 2019/20. In addition, for the out-years of the fiscal plan period (2018/19 and 2019/20) some of the pressures have been tracked in Contingencies and the Budget 2017 Update now adds these amounts to base budgets of the appropriate ministries. In total, $490 million in additional funding for these compensation costs during the fiscal plan period will now be part of ministry base budgets. The next mandate for public sector negotiations has not yet been determined.

A key component of the ESM was the commitment for additional wage increases, known as the Economic Stability Dividend (ESD), payable if actual annual provincial real economic growth (GDP) exceeds the independent Economic Forecast Council’s forecasted growth for that year as published in provincial budgets. Two ESD payments have now been made in Budget 2016 and February’s Budget 2017, providing an overall general wage increase of 0.8 per cent to eligible groups.

The Council’s forecast for B.C.’s real (inflation adjusted) GDP growth for 2016, as published in Budget 2016, was 2.7 per cent. In November 2017, the actual rate of growth for that year will be reported by Statistics Canada and at that time it will be known if a third ESD will be paid. Should actual growth turn out to be higher than the Council’s forecast, any further ESD payments will again be managed from within the fiscal plan.

Recovered Expenses

Government projects it will incur $8.9 billion in program spending over the fiscal plan period whose costs will be recovered from third parties.

Recovered costs include an estimated $2.7 billion in interest payments from commercial Crown corporations through the fiscal agency loan program and from sinking fund investment returns. Interest recoveries have fallen by $241 million from Budget 2017 due mainly to the extinguishment of Transportation Investment Corporation’s fiscal agency loan agreement. Interest costs related to Port Mann debt remain within the Consolidated Revenue Fund, there is no overall change to interest costs for government.

A total of $2.1 billion of programs will be delivered with funding from the federal government, such as the Labour Market Development Agreement, the Canada Job Grant, integrated workplace solutions, and child and family support programs. This amount is $428 million higher than February’s Budget 2017 due primarily to new funding for mental health.

$1.7 billion in government spending is supported by other miscellaneous sources, including hospital expansion costs recovered from regional hospital districts, MSP and PharmaCare costs paid by agencies and other jurisdictions, and employee health benefits costs collected from participating government agencies.

$2.4 billion in remaining cost recoveries will be invested in a variety of programs, including industry-funded regulatory programs recovered through fees and fees recovered for collections services rendered.

Government reports the expenses incurred and the recoveries as revenue. The offsetting nature of these amounts results in no net impact to government’s fiscal plan.

Budget 2017 Update – 2017/18 to 2019/20


Operating Transfers

Approximately 60 per cent of ministry spending takes the form of transfers paid to service delivery agencies for the provision of services on behalf of government. These transfers will total $77.8 billion over the three year fiscal plan period and will support education, health care, social services, housing, and transportation programs delivered by the agencies. These service delivery agencies include the SUCH sector (schools, universities, colleges and health organizations), Community Living BC, BC Housing Management Commission, BC Transit, and the BC Transportation Financing Authority.

The CRF’s statutory appropriation for the extinguishment of Transportation Investment Corporation’s fiscal agency loan agreement and the corporation’s debt write-off offset, resulting in no impact to government’s operating results. The elimination of this transaction is shown in Table 1.11 as a reflection of this related party relationship.

Service Delivery Agency Spending

Service delivery agency spending is projected to total $33.2 billion by 2019/20, reflecting an increase of $1.4 billion over the fiscal plan period.

School district spending is projected to rise from $6.1 billion in 2016/17 to $6.6 billion by 2019/20 – an increase of $531 million, or 8.2 per cent over the three year period. This spending increase is primarily due to salary and benefits cost increases relating to higher projected student enrolment and the agreement reached to fund the hiring of new teachers.

Post-secondary institutions spending is projected to rise from $5.6 billion in 2016/17 to $6.2 billion by 2019/20 – an increase of $622 million, or 11 per cent over the three year period. The spending increase is primarily due to increased salary costs relating to the Economic Stability Mandate agreements, higher amortization costs in line with ongoing self-funded capital asset investments, and higher operating costs due to inflationary pressures and higher enrolment.

Health authority and hospital society spending is projected to rise from $14.2 billion in 2016/17 to $15.6 billion by 2019/20 – an increase of $1.4 billion, or 9.9 per cent over the three year period. In addition to the fentanyl emergency and higher drug costs, this spending increase is due to increasing staffing and operating costs incurred to meet the projected volume growth in healthcare services delivered by these organizations.

Projected spending by other service delivery agencies is forecast to total $14.4 billion over the fiscal plan period. This spending relates mainly to services in the transportation, social services, and housing sectors.

Capital Spending

In Budget 2017 Update, capital spending on schools, hospitals, roads, bridges, hydro-electric projects and other infrastructure across the province is expected to total $23.1 billion over the fiscal plan period. These investments will help ensure that the necessary infrastructure is in place to deliver the services that people count on in communities across the province and create jobs that support a sustainable economy.

Taxpayer-supported Capital Spending

Taxpayer-supported capital spending over the next three years will total $14.6 billion, and includes completion of existing approved projects along with new investments to expand and sustain provincial infrastructure including schools, post-secondary facilities, roads and hospitals. This total is $930 million higher than Budget 2017 mainly due to increases in


Budget 2017 Update – 2017/18 to 2019/20

health authorities’ forecasted self-funded spending on routine capital and other priority projects and new investments in housing.

Investments in Schools

Over the three years of the capital plan, $2.0 billion will be invested to maintain, replace, renovate or expand K–12 facilities, including continued investment in new school space to accommodate increasing enrolment in growth districts, and continued investment in the program to seismically upgrade or replace schools.

Current and planned K–12 capital investments in Budget 2017 Update include:• AnewGrandviewHeightsSecondarySchoolwillprovide1,500newspacesinSurrey.

The school design will allow for future classroom additions to accommodate future growth. This school is expected to be completed in 2020.

• Upto5,200newstudentseatsinSurreywithaninvestmentof$217 millionoverthenext three years to address the substantial enrolment growth in this area.

• SmilingCreekElementaryinCoquitlamwillprovide430studentspaces,aswellasaNeighbourhood Learning Centre. In addition, students will be able to access a new park and sports field next to the school through an agreement with the city. The new school is expected to open in September 2018.

Table 1.17 Capital Spending

($ millions)Actual

2016/17


Plan2018/19

Plan2019/20

3yr cum

Taxpayer-supportedEducation

Schools (K–12) ………………………………………… 474 635 687 629 1,951 Post-secondary institutions …………………………… 792 897 831 857 2,585

Health ……………………………………………………… 1,004 1,218 1,037 854 3,109 BC Transportation Financing Authority 1………………… 823 1,169 1,283 1,676 4,128 BC Transit ………………………………………..………… 41 152 136 127 415 Government ministries …………………………………… 301 515 451 448 1,414

Housing 2…………………………………………………… 184 303 361 183 847

Other 3……………………………………………………… 40 67 69 40 176

Total taxpayer-supported ……………………………… 3,659 4,956 4,855 4,814 14,625 -

Self-supported BC Hydro …………………………………………………… 2,444 2,421 2,434 2,961 7,816 Columbia River power projects 4 ………………………… 2 13 7 18 38 Transportation Investment Corporation 1………………… 38 - - - - BC Railway Company …………………………………… 4 34 20 3 57 ICBC ………………………………………………………… 62 60 40 40 140 BC Lotteries ………………………………………………… 86 90 105 105 300

Liquor Distribution Branch ………………………………… 27 83 29 27 139

Other 3……………………………………………………… 62 - - - -

Total self-supported commercial ……………………… 2,725 2,701 2,635 3,154 8,490

Total capital spending ………………………………… 6,384 7,657 7,490 7,968 23,115

1

2

3

4Includes BC Pavilion Corporation and other service delivery agencies.Includes BC Housing Management Commission and Provincial Rental Housing Corporation.

Joint ventures of the Columbia Power Corporation and Columbia Basin Trust.

Includes Transportation Investment Plan capital spending and, beginning in 2017/18, Tranportation Investment Corporation rehabilitation costs for the Port Mann bridge due to reclassification from self-supported commercial Crown corporation to a taxpayer-supported agency in response to the cancellation of tolls.

j:\FEP\ECB\Budget\Budget_06\Budget and 3-Year Fiscal Plan Document\Fiscal Tables\part 1 – 3 year fiscal plan\Table 1.17 Capital spending 2017-09-02 4:06 PM

Budget 2017 Update – 2017/18 to 2019/20


• AseismicupgradetoAlphaSecondaryinBurnabywillincludethereplacementoftwoclassroom wings with more efficient and modern space; the remainder of the existing building will be retained and seismically strengthened. It is expected that the project will be completed in 2018.

• $52.7 millionoverthethreeyearfiscalplanperiodtoaddresscapitalneedsfortheConseil scolaire francophone de la Colombie-Britannique school district (CSF). A funding envelope has been established, with the value of future funds established through the long-term capital planning process.

Spending to Support Post-secondary Education

Budget 2017 Update includes $2.6 billion in capital spending over the next three years by post-secondary institutions across the province. Investments in priority projects will build capacity and help meet the province’s future workforce needs in key sectors, including science, trades and technology. A significant portion of this capital investment is funded through other sources, including foundations, donations, cash balances, revenues generated from services and federal funding.

This investment includes projects supported by the Federal Government’s Post-Secondary Institutions Strategic Investment Fund. This targeted, short-term funding program will promote economic activity across Canada and help Canada’s universities and colleges develop highly skilled workers, act as engines of discovery, and collaborate on innovations that help Canadian companies compete and grow internationally.

Examples of current and planned investments in the post-secondary sector include:• ConstructionofanewSustainableEnergyandEnvironmentalEngineeringBuilding

at the Surrey campus of Simon Fraser University for 515 students that will create jobs, expand research and foster innovation.

• ConstructionofanewIndustrialTrainingandTechnologyCentreatThompsonRiversUniversity in Kamloops for 550 additional students that will accommodate a range of new and existing trades, technology and industrial programs that will prepare the students for in-demand careers in the region.

• RenewaloftradesfacilitiesattheCollegeoftheRockiesinCranbrookwhichincludesexpansion for an increased capacity of 325 students.

• ConstructionofanewHeavyDutyMechanicsbuildingattheCollegeofNewCaledonia in Prince George to accommodate 251 existing students and up to 48 new students in the heavy-duty equipment technician and truck and transport mechanics program.

• RenovationandrenewalofthetradesfacilitiesatSelkirkCollegeinNelsontoimprovethe current delivery of trades education and meet future trades training requirements for the region.

• ConstructionofanewhealthsciencescentreatCamosunCollegethatwillhouse18 health science programs, such as community mental health, athletic and exercise therapy, and nursing, as well as university-transfer health programs.

• AnewHealthandScienceCentreatVancouverIslandUniversitythatwillco-locatethe majority of its health and chemistry programs into one facility. The centre will also include new teaching labs for nursing and other health programs and the Applied Environmental Research Laboratory, which conducts applied research in the environmental sciences.


Budget 2017 Update – 2017/18 to 2019/20

• $71.2 millionofcapitalinfrastructureinvestmentsinruralareasofBC,including:– North Island College, Campbell River Campus trades facilities replacement and

campus consolidation;– Northwest Community College, Terrace Campus trades facilities renewal;– Northern Lights College, Dawson Creek, trades campus replacement; and– Okanagan College, Vernon Campus new trades training facility.

Expanding and Upgrading Health Facilities

Capital spending on infrastructure in the health sector will total $3.1 billion over the next three years. These investments support new major construction projects and upgrading of health facilities, medical and diagnostic equipment, and information management/technology systems. These investments are supported by funding from the Province as well as other sources, such as regional hospital districts and foundations.

Key capital investments in the health sector include:• Phase 1oftheRoyalColumbianHospitalRedevelopment,whichincludesanew

75-bed mental health and substance use centre, a new energy centre, a multi-level underground parkade, associated tunnel and bridge connections to the existing hospital, an IT network perimeter pathway, and IT communications hub. Construction started in early 2017 and is expected to complete in late 2019.

• ReplacementoftheBurnabyCentreforMentalHealthandAddictions(CMHA)with a new purpose-built, 105-bed facility to be constructed on the Riverview Lands in Coquitlam. The CMHA provides highly specialized tertiary care assessments, diagnostic and treatment services to people with a complex mix of problematic substance use, mental illness, physical health and behavioural and social problems. Construction of the new CMHA is expected to begin in fall 2017.

• Constructionoftwonewhospitals(onelocatedinCourtenay/ComoxandoneinCampbell River) to replace existing North Island hospitals and provide a total of 248 patient beds, an increase of 62 beds on the North Island. Construction of the hospitals commenced in August 2014 and both are scheduled to be open to patients in fall 2017.

• Phase 2oftheredevelopmentofChildren’sandWomen’sHospitalwhichincludesthe new Teck Acute Care Centre to replace 179 acute care beds and expand service to 221 beds, plus expand the emergency department, maternity, pediatric operating rooms and diagnostic imaging and procedures areas. Construction of the Teck Acute Care Centre completed in July 2017 with occupancy planned for fall 2017. Phase 3, which will relocate the Sunny Hill Health Centre for Children to the Oak Street Campus and expand Single Room Maternity Care by 10 beds, is expected to start construction in early 2018 and complete in late 2019.

• Constructionofthenew100-bedJosephandRosalieSegalFamilyHealthCentreto replace and consolidate specialized mental health services at Vancouver General Hospital. Construction started in January 2015 completed in April 2017, and the new facility opened to patients in late August 2017.

• Anew107-bedpatientcaretowerattheRoyalInlandHospitalinKamloopsthatwill improve patient experience and outcomes by significantly increasing the number of single-patient rooms, providing new and larger operating rooms and expanding the existing emergency department. Construction on the new patient care tower is expected to start in 2018 and be open to patients in 2022. Internal renovations to the emergency department, pediatric unit and morgue are scheduled to begin in 2022 and complete in 2024.

Budget 2017 Update – 2017/18 to 2019/20


• Anewpatientcaretower,includingasurgicalservicescentre,atthePentictonRegionalHospital that will improve patient experience and outcomes. Construction on the new patient care tower began in 2016 and is scheduled to complete in early 2019. Internal renovations to the emergency department and pharmacy are scheduled to begin in 2019 and complete in 2021.

Housing Investments

Budget 2017 Update includes new capital spending on housing, which represents the initial steps taken to address homelessness and supports government’s action plan to make housing more affordable for British Columbians. These provincial investments will support the construction of over 3,700 housing units as part of government’s commitment to help build 114,000 units of housing over ten years, in partnership with local governments, the federal government, and the private and not-for-profit sectors.• Modular Supportive Housing: $291 million for the construction of 2,000 modular

housing units that will be deployed across the Province to help house the homeless. • Affordable Rental Housing: $208 million over four years to support the construction of

over 1,700 new units of affordable rental housing in communities across the Province and for a wide variety of populations, including low-to-moderate income renters, seniors, and adults with developmental disabilities or mental health challenges.

Supporting the Transportation Investment Plan

Budget 2017 Update includes continued investments in government’s Transportation Investment Plan. The Province has secured federal cost sharing on projects and has also leveraged investments through partnerships with private partners. Over the next year, BC will continue to work with the federal and municipal governments to identify priorities and confirm details around project criteria, timelines and cost-sharing arrangements for the new federal infrastructure funding.

Key capital investments in the transportation sector include:• Realigning2 kmofHighway 16andgradeseparatingtheCN28 Milelevelcrossing,

the last remaining level rail crossing on Highway 16, to reduce delays, improve safety and improve the flow of goods to and from the Port in Prince Rupert.

• Four-laning3.4 kmofHighway16tothewestofPrinceGeorge,includingintersection improvements and center-line median, from Bunce Road to east of Jensen Road to reduce congestion, improve safety and facilitate access to and from the highway.

• Four-laning6.3 kmofHighway 1tothewestofSalmon Arm,includingintersectionimprovements and replacement of the Salmon River Bridge, between IR#3 and 10th Street SW to reduce congestion, improve safety, support economic development opportunities and facilitate the movement of goods.

• Six-laning4.5 kmofHighway 97inKelowna,includingupgradestomajorintersections, from Highway 33 to Edwards Road to reduce congestion, improve safety and facilitate access to and from the highway.

• AnewinterchangeonHighway 1attheintersectionwithAdmiralsRoadandMcKenzie Avenue, including transit, pedestrian and cycling facilities, to reduce congestion, improve safety and facilitate the movement of goods, services and people.


Budget 2017 Update – 2017/18 to 2019/20

• Four-laning5 kmofHighway 1throughtheMalahatVillage,includingaccessconsolidation, frontage roads and 3 km of median barrier, from Shawnigan Lake Road to Aspen Road to reduce congestion, improve safety and facilitate access to and from the highway.

• AninterchangeonHighway 1at216th Street in Langley and six-laning of the highway between 202nd Street and the new interchange to reduce congestion, increase capacity and improve connectivity between communities to the north and south of the highway.

• Anew7th lane on the Alex Fraser Bridge, including a moveable median barrier to allow counter-flow during peak periods and dynamic messaging signs to provide users real-time traffic information, and a new interchange on Highway 91 at 72nd Avenue to reduce congestion and improve mobility.

The public and private sector will provide about $4.7 billion for transportation investments over the next three years, including:• $3.4 billionofprovincialinvestmentintransportationinfrastructure;• $1.3 billionofinvestmentleveragedthroughfederalcostsharingandpartnerships

with private partners, local governments and other agencies; and• $47 millionbytheTransportationInvestmentCorporation,mainlycoststodate

for the George Massey Tunnel Replacement project before the cancellation of procurement.

Further information is provided in Table 1.18.

Table 1.18 Provincial Transportation Investments

($ millions)Actual

2016/17 2017/18 2018/19 2019/203-Year Total

Provincial investments:– Highway rehabilitation ………………………………………………………… 206 255 216 218 689 – Side road improvement program ……………………………………………… 87 96 90 90 276 – Natural gas road upgrade program …………………………………………… 18 22 20 20 62 – Highway 1 (Kamloops to Alberta border) …………………………………… 37 68 70 135 273 – Okanagan Valley corridor ……………………………………………………… 25 60 27 42 129 – Cariboo Connector program …………………………………………………… 29 45 47 52 144 – Major highway corridors and roads …………………………………………… 143 278 295 286 859 – Other transportation programs ………………………………………………… 58 88 52 60 200 – Transit Infrastructure …………………………………………………………… 153 176 218 337 731

Total provincial investments 1 ………………………………………………… 756 1,088 1,035 1,240 3,363

Investments funded through contributions from other partners ……… 242 283 399 607 1,289

Total investments in transportation infrastructure ……………………… 998 1,371 1,434 1,847 4,652

Transportation Investment Corporation– George Massey Tunnel Replacement project 2 …………………………… 22 44 - - 44 – Port Mann Bridge/Highway 1 project 3 ……………………………………… 16 3 - - 3

Total investments ……………………………………………………………… 38 47 - - 47

Total investments in transportation infrastructure including investments from the Transportation Investment Corporation ……… 1,036 1,418 1,434 1,847 4,699

1

2

3

Government's recent decision to cancel the procurement of the George Massey Tunnel Replacement project will result in a onetime expense write-off of $52 million of the $66 million in capital costs incurred to date. Remaining capital costs of $14 million relate to land acquisition for the project.

Total provincial investments include operating and capital spending.

Port Mann bridge rehabilitation costs are included in highway rehabilitation effective September 1, 2017.

Budget 2017 Update – 2017/18 to 2019/20


Ministry Capital Spending

Budget 2017 Update includes $1.4 billion in capital spending by government ministries over the plan period. This will support investments in maintaining, upgrading or expanding infrastructure such as courthouses, correctional centres, office buildings, and information systems.

Key capital investments made by government ministries include:• InsupportoftheBC ParksFutureStrategy,theprovincecontinuestoinvestin

maintaining and refurbishing existing campsites. In addition, over the next five years more than 1,900 new campsites will be developed in provincial parks and recreation sites.

•AnewAbbotsfordcourthouse,expectedtobecompletedinlate2020,willdoublethenumber of courtrooms available in the current facility and increase courtroom capacity in the Lower Fraser Valley Region.

• AnewbuildingwillalsobeconstructedinCoquitlamtoaccommodatetheMaplesAdolescent Treatment Centre and the Provincial Assessment Centre.

Capital Project Reserves

The Province has included $196 million in project reserves in its three year capital plan as a prudent planning measure. In addition to covering risks from unforeseen costs for ministry capital projects, the reserves will be used to fund emerging capital priorities of government ministries.

Financing Capital Projects

Provincial capital infrastructure spending is financed through a combination of sources:• cashbalanceswithintheorganizations;• partnershipswiththeprivatesector(public-privatepartnerships,orP3s);• costsharingwithpartners(e.g.federalgovernment,regionalhospitaldistricts);and• directborrowing.

Chart 1.6 Financing government’s capital plan

$1,950

$2,887

$3,513

$2,252

$219

$91

$48

$65

$245

$537

$524

$663$416

$387

$288

$339$829

$1,054$482

$1,495

2016/17 2017/18 2018/19 2019/20

$ millions

Federal contributions

Direct borrowing

P3 liabilities

$3,659 $4,956 $4,855Total taxpayer-supportedcapital spending

Sources of financing:

Cash and working capital

Other contributions

$4,814

Chart 1.6 Financing government’s capital plan


Budget 2017 Update – 2017/18 to 2019/20

Self-supported Capital Spending

Self-supported capital spending is projected to total $8.5 billion over the fiscal plan period. This is a decrease of $2.3 billion from the Budget 2017 forecast, mainly due to the cancellation of procurement for the Transportation Investment Corporation’s George Massey Tunnel Replacement project. Self-supported capital investments include:• $7.9 billion(93 per cent)oftotalself-supportedcapitalspendingwillbeusedfor

electrical generation, transmission and distribution projects to meet growing customer demand and to enhance reliability. Included in this total is initial construction of a third power facility on the Peace River through the Site C Clean Energy project.

The majority of BC Hydro’s hydroelectric system was built between the 1960s and early 1980s and provides over 95 per cent of the total electricity generated by the corporation. This vast system is ageing and requires a broad range of investments to maintain reliability – from seismic and safety improvements at dams, to expanding and strengthening the transmission system. Roughly half of BC Hydro’s capital spending represents measures to address ageing infrastructure. In addition, BC Hydro is investing in new generation to meet expected growth in the need for energy and dependable capacity.

• $300 millionwillbeusedforBC LotteryCorporationprojectsincludingreplacementof key legacy business systems, expansion of the lottery distribution network, and acquisition of gaming equipment to support lottery, PlayNow internet gaming, casino and community gaming activities.

• $140 millionwillbeusedforICBCprojectsincludinginvestmentininformationtechnology and facility maintenance and upgrades.

• $139 millionwillbeinvestedbytheLiquorDistributionBranchforcostsrelatedto the Liquor Distribution Branch Warehouse project, updates and improvements to retail stores, technology-related projects and ongoing operating equipment replacements.

Table 1.19 provides information on major capital projects, and further details on provincial capital investments are shown in the service plans of ministries and Crown agencies.

Projects Over $50 Million

Approved major capital projects with multi-year budgets totaling $50 million or more, including provincial funding, are shown in Table 1.19. Annual allocations of the budget for these projects are included as part of the provincial government’s capital spending shown in Table 1.17.

In addition to financing through provincial sources, major projects may be cost-shared with the federal government, municipalities and regional districts, and/or the private sector. Total capital spending for these major projects is $30 billion, reflecting provincial financing of $26.5 billion including internal sources and P3 liabilities, as well as $3.5 billion in contributions from the federal government and other sources including private donations.

Major capital investments include $1.7 billion for school replacement projects; $407 million for post-secondary institutions; $5.3 billion for health facilities; $6.3 billion for major transportation capital infrastructure; $462 million for projects in other sectors;

Budget 2017 Update – 2017/18 to 2019/20


Table 1.19 Capital Expenditure Projects Greater Than $50 million 1

Note: Information in bold type denotes changes from Budget 2017 released on February 21, 2017.Project Estimated Anticipated Project Financing

Year of Cost to Cost to Total Internal/ P3 Federal Other($ millions) Completion June 30, 2017 Complete Cost Borrowing Liability Gov't Contrib'ns

Taxpayer-supportedSchool districts

Centennial Secondary …………………………………… 2017 46 15 61 61 - - - Kitsilano Secondary ……………………………………… 2017 58 7 65 61 - - 4 Salish Secondary ………………………………………… 2017 32 23 55 45 - - 10 Grandview Heights Secondary ………………………… 2020 1 60 61 46 - - 15 New Westminster Secondary …………………………… 2021 3 104 107 107 - - - Willoughby Slope Secondary …………………………… 2019 - 55 55 35 - - 20 Seismic mitigation program …………………………… 2030 178 1,122 1,300 1,300 - - -

Total school districts …………………………………… 318 1,386 1,704 1,655 - - 49 Post-secondary institutions

Emily Carr University of Art and Design – Campus redevelopment at Great Northern Way– Direct procurement …………………………………… 2017 10 9 19 15 - - 4 – P3 contract ……………………………………………… 2017 102 2 104 27 60 - 17 University of British Columbia –

Undergraduate Life Science Teaching Laboratories Redevelopment ………………….. 2018 24 56 80 12 - 32 36

Simon Fraser University –Energy Systems Engineering Building 3……………… 2019 31 95 126 45 - 45 36

British Columbia Institute of TechnologyHealth Sciences Centre for Advanced Simulation … 2020 - 78 78 66 - - 12 Total post secondary institutions …………………… 167 240 407 165 60 77 105

Health facilitiesQueen Charlotte/Haida Gwaii Hospital 2……………… 2016 48 2 50 31 - - 19 Surrey Emergency/Critical Care Tower– Direct procurement …………………………………… 2018 156 38 194 174 - - 20 – P3 contract ……………………………………………… 2014 318 - 318 139 179 - - Royal Inland Hospital Clinical Services

Building 2………………………………………………. 2016 60 3 63 38 - - 25 Royal Inland Hospital Patient Care Tower …………… 2024 - 417 417 202 - - 215 Vancouver General Hospital - Jim Pattison

Pavilion Operating Rooms …………………………. 2021 2 100 102 35 - - 67 North Island Hospitals – Direct procurement …………………………………… 2017 52 74 126 73 - - 53 – P3 contract ……………………………………………… 2017 475 5 480 60 232 - 188 Interior Heart and Surgical Centre– Direct procurement …………………………………… 2018 152 96 248 213 - - 35 – P3 contract ……………………………………………… 2015 133 - 133 4 79 - 50 Vancouver General Hospital – Joseph and

Rosalie Segal Family Health Centre ………………… 2017 71 11 82 57 - - 25 Children's and Women's Hospital – Direct procurement …………………………………… 2019 163 144 307 177 - - 130 – P3 contract ……………………………………………… 2017 359 10 369 168 187 - 14 Penticton Regional Hospital – Patient Care

Tower – Direct procurement …………………………………… 2021 9 71 80 22 - - 58 – P3 contract ……………………………………………… 2019 75 157 232 - 139 - 93 Royal Columbian Hospital – Phase 1 …………….. 2019 26 233 259 250 - - 9 Royal Columbian Hospital – Phases 2 & 3 ………. 2026 - 1,100 1,100 1,037 - - 63 Peace Arch Hospital Renewal ……………………… 2021 1 67 68 8 - - 60 Centre for Mental Health and Addictions ……………… 2019 2 99 101 101 - - - Clinical and systems transformation …………………… 2023 207 273 480 480 - - - iHealth Project – Vancouver Island Health

Authority ……………………………………………. 2020 72 28 100 - - - 100

Total health facilities …………………………………… 2,381 2,928 5,309 3,269 816 - 1,224


Budget 2017 Update – 2017/18 to 2019/20




TransportationEvergreen Line Rapid Transit 2

– Direct procurement …………………………………… 2016 426 4 430 215 - 74 141 – P3 contract ……………………………………………… 2016 922 - 922 - 292 350 280 Port Mann Bridge / Highway 1 2 .............................. 2017 3,318 1 3,319 3,319 - - - Highway 97 widening from Highway 33 to

Edwards Road …………………………..……………… 2017 42 18 60 42 - 18 - Highway 99 10-Mile Slide ……………………………… 2018 4 56 60 60 - - - Highway 91 Alex Fraser Bridge Capacity

Improvements …………………………..……………… 2018 2 68 70 36 - 34 - Highway 1 – Admirals Road/McKenzie Avenue

Interchange …………………………………………… 2019 36 49 85 52 - 33 - Highway 1 widening and 216th Street -

Interchange …………………………..………………… 2019 11 48 59 23 - 22 14 Highway 7 Corridor Improvements ………………… 2019 2 68 70 48 - 22 - Highway 1 Lower Lynn Corridor

Improvements ……………………………..…………… 2021 25 173 198 77 - 66 55 Highway 91 to Highway 17 and Deltaport Way

Corridor Improvements ……………………………… 2022 - 245 245 80 82 83 Highway 1 Salmon Arm West ………………………… 2022 24 139 163 115 - 48 - Highway 1 Hoffmans Bluff to Jade Mountain ……… 2022 10 189 199 144 - 55 - Highway 1 Kicking Horse Canyon Phase 4 …………… 2024 11 439 450 235 - 215 -

Total transportation …………………………………… 4,833 1,497 6,330 4,446 292 1,019 573

Other taxpayer-supportedSingle Room Occupancy Hotel renewal initiative– Direct procurement …………………………………… 2017 29 - 29 22 - 2 5 – P3 contract ……………………………………………… 2017 123 - 123 - 96 27 - Abbotsford courthouse ………………………………… 2020 2 155 157 151 - - 6 Natural Resource Permitting Project 4………………… 2018 61 17 78 78 - - - Maples Adolescent Treatment Centre -

and Provincial Assessment Centre ………………… 2019 11 64 75 75 - - -

Total other ……………………………………………… 226 236 462 326 96 29 11

Total taxpayer-supported ................ 7,925 6,287 14,212 9,861 1,264 1,125 1,962

Budget 2017 Update – 2017/18 to 2019/20





Power generation and transmissionBC Hydro– Mica SF6 gas insulated switchgear

replacement 2 ……………....................................... 2014 187 4 191 191 - - - – Northwest transmission line 2……………................. 2014 695 9 704 317 - 130 257 – Iskut extension project 2……………………………... 2014 169 - 169 110 - - 59 – Merritt area transmission 2 …………………………… 2015 58 2 60 60 - - - – Smart metering and infrastructure program 2 …….. 2015 779 1 780 780 - - - – Interior to Lower Mainland Transmission Line 2…… 2015 717 26 743 743 - - - – G.M. Shrum units 1 to 5 turbine replacement 2……… 2015 176 9 185 185 - - - – Hugh Keenleyside spillway gate reliability

upgrade 2……………………………………………… 2015 111 4 115 115 - - - – Upper Columbia capacity additions at

Mica units 5 and 6 project 2 ………………………… 2015 593 12 605 605 - - - – Long Beach area reinforcement 2…………………… 2015 37 1 38 38 - - - – Dawson Creek/Chetwynd area transmission 2……… 2015 292 4 296 296 - - - – Surrey area substation project 2……………………… 2016 79 15 94 94 - - - – Big Bend substation 2 ………………………………… 2017 65 7 72 72 - - - – Ruskin Dam safety and powerhouse upgrade ……… 2018 549 199 748 748 - - - – Horne Payne substation upgrade project…………… 2018 35 58 93 93 - - - – John Hart generating station replacement ………… 2019 743 350 1,093 1,093 - - - – Cheakamus unit 1 and 2 generator replacement …………………………………………… 2019 18 56 74 74 - - - – Fort St. John and Taylor Electric Supply.................. 2019 2 51 53 53 - - - – W.A.C. Bennett Dam riprap upgrade project............ 2019 76 94 170 170 - - - – South Fraser transmission relocation project ……………………………………… 2019 17 59 76 76 - - - – Bridge River 2 units 5 and 6 upgrade project ..... 2019 11 75 86 86 - - - – G.M. Shrum G1-G10 control system upgrade 5…………………………………………........ 2021 15 45 60 60 - - - – UBC load increase stage 2 project ......................... 2021 3 52 55 55 - - - – Mica replace units 1-4 transformers project ........ 2022 - 82 82 82 - - - – Site C clean energy project …………………………… 2024 1,800 6,975 8,775 8,775 - - - Columbia River power projects 6

– Waneta Dam power expansion 2, 7…………………… 2018 329 16 345 345 - - -

Total power generation and transmission …………… 7,556 8,206 15,762 15,316 - 130 316

Other self-supportedLiquor Distribution Branch Warehouse ………………… 2019 1 56 57 57 - - -

Total other ……………………………………………… 1 56 57 57 - - -

Total self-supported ........................ 7,557 8,262 15,819 15,373 - 130 316

Total $50 million projects ................ 15,482 14,549 30,031 25,234 1,264 1,255 2,278

1

2

3 Simon Fraser University and private donors will contribute $26 million toward the project, and the university is also contributing land valued at $10 million.4 Reflects approved capital costs to date, subject to change if future scope components are approved by government.5

6

7 Reflects the combined shares of Columbia Power Corporation (32.5 per cent) and Columbia Basin Trust (16.5 per cent) in their partnership with Fortis Inc. for the development of an electricity generating expansion facility at the Waneta Dam south of Trail.

Only projects that receive provincial funding and have been approved by Treasury Board and/or Crown corporation boards are included in this table. Ministry service plans may highlight projects that still require final approval. Capital costs reflect current government accounting policy.

Assets have been put into service and only trailing costs remain.

The G.M. Shrum G1-G10 control system upgrade project has three phases. The total authorized capital amount of $60M represents partial implementation funding as at June 30, 2017 for phases I and II and definition funding for phase III.

Does not include the purchase of the remaining two-thirds interest in the Waneta Dam and Generating Station. Completing this transaction is subject to a number of conditions, including approval of the BC Utilities Commission.


Budget 2017 Update – 2017/18 to 2019/20

$15.8 billion primarily for power generation and transmission capital projects by BC Hydro and for Columbia River power projects; and $57 million (plus leasing costs) for the Liquor Distribution Branch’s new Vancouver Distribution Centre warehouse.

Since Budget 2017 nine projects have been added to the table:• ConstructionofthenewBritishColumbiaInstituteofTechnologyHealthSciences

Centre for Advanced Simulation ($78 million);• RoyalColumbianHospitalPhase 2 & 3($1.1 billion)redevelopmentprojectin

New Westminster;• RenewalofthePeaceArchHospitalinWhiteRock($68 million);• Highway 7Corridorimprovements($70 million)toaddresssafetyandmobilityissues

in Pitt Meadows, Maple Ridge, and Mission;• Highway 91toHighway 17andDeltaport WayCorridorimprovements

($245 million) in Delta and Surrey;• Highway 1HoffmansBlufftoJadeMountain($199 million)project;and• ThreeBC Hydroprojects:BridgeRiver 2units 5and6upgrade($86 million),UBC

load increase stage 2 ($55 million), and Mica replacement units 1-4 transformers ($82 million).

The following projects have been completed since Budget 2017 and are no longer listed in the table:• OakBaySecondarySchoolconstruction;• LionsGateHospital(MentalHealth)redevelopment;• LakesDistrictHospital;and• OkanaganCorrectionalCentre.

Changes since Budget 2017 for existing projects include:• GrandviewSecondarySchoolprojectfinancingcorrectedby$1 millionfrom

provincial internal borrowing to the school district’s contribution. Overall cost of the project remains unchanged;

• NewWestminsterSecondarySchoolprojectcompletiondatechangedfrom2020to2021 to align with the revised project schedule;

• TotalestimatedcostfortheRoyalInlandHospitalClinicalServicesbuildinghasdecreased $17 million as the project nears completion. The anticipated savings were reallocated to the Royal Inland Hospital Patient Care Tower project as part of the $417 million budget;

• TotalanticipateddirectprocurementcostfortheChildren’sandWomen’sHospitalproject has decreased $2 million from $309 million to $307 million to reflect a revised forecast for the total cost of the project;

• TheRoyalColumbianHospitalprojectnamewaschangedtoRoyalColumbianHospital – Phase 1;

• TheiHealthprojectcompletiondatecorrectedto2020toalignwiththeiHealthproject schedule;

• TheanticipatedcostfortheEvergreenLineRapidTransitprojecthasbeenreducedby$1 million from $431 million to $430 million;

• ThePortMannBridge/Highway 1projectwasreclassifiedfromaself-supportedproject to a taxpayer-supported project;

Budget 2017 Update – 2017/18 to 2019/20


• ThetotalestimatedcostfortheSingleRoomOccupancyHotelrenewalinitiativehas increased $5 million from $147 million to $152 million to reflect additional costs related to unforeseen building and environmental risks, resulting in a longer construction period and higher interest costs; and

• TheprocurementoftheproposedGeorgeMasseybridgehasbeencancelledandtheproject has been removed from the major projects table.

• ThetargetedinservicedateforBC Hydro’sRuskinDamsafetyandpowerhouseupgrade project changed from 2017 to 2018 to align with the revised project schedule.

Provincial Debt

Total provincial debt will increase by $6.9 billion over the fiscal plan period to reach $72.8 billion by 2019/20. The increase is mainly due to borrowing requirements related to taxpayer-supported capital investments, offset by falling operating debt and self-supported debt due to the cancellation of procurement for the George Massey Tunnel Replacement project.

Table 1.20 Provincial Debt Summary 1

($ millions unless otherwise indicated)Actual

2016/17


Plan 2018/19

Plan 2019/20

Taxpayer-supported debtProvincial government direct operating ............................................. 4,644 1,573 249 - Other taxpayer-supported debt (mainly capital)Education 2……………………………………………………………………… 13,457 14,330 15,280 15,103 Health 3………………………………………………………………………… 7,552 8,014 8,642 8,659 Highways and public transit 4, 5 ……………………………………………… 12,249 16,794 18,035 19,593 Other 6 …………………………………………………………………………… 3,604 4,142 4,825 5,287 Total other taxpayer-supported debt …………………………………… 36,862 43,280 46,782 48,642

Total taxpayer-supported debt ……………………………………………… 41,506 44,853 47,031 48,642 Self-supported debt 5 ……..........................................................………… 24,377 21,624 22,509 23,764 Total debt before forecast allowance ……………………………………… 65,883 66,477 69,540 72,406 Forecast allowance 7 …………………………………………………………… - 300 300 350 Total provincial debt …………………………………………………………… 65,883 66,777 69,840 72,756

Debt as a per cent of GDPProvincial government direct operating …………………...………………… 1.8% 0.6% 0.1% 0.0%Taxpayer-supported ………………………………………….……………… 15.8% 16.2% 16.4% 16.3%Total provincial ………………………………………….……………………… 25.1% 24.2% 24.3% 24.3%

Taxpayer-supported debt per capita ($) …………………………………… 8,735 9,332 9,672 9,889 Taxpayer-supported interest bite (cents per dollar of revenue) ……… 3.2 3.5 3.8 3.91

2

3

4

5

6

7 Reflects the operating statement forecast allowance for each year (amounts are not cumulative). Since it is unknown as to which agency would require this debt, the forecast allowance is shown as a separate item over the plan.

Health facilities' debt includes public-private partnership obligations of $1,586 million for fiscal 2016/17, $1,652 million for fiscal 2017/18, $1,676 million for fiscal 2018/19, and $1,713 million for fiscal 2019/20.BC Transportation Financing Authority's debt includes public-private partnership obligations of $824 million for fiscal 2016/17, $783 million for fiscal 2017/18, $752 million for fiscal 2018/19, and $725 million for fiscal 2019/20.

Provincial debt is prepared in accordance with Generally Accepted Accounting Principles and presented consistent with the Debt Summary Report included in the Public Accounts . Debt is shown net of sinking funds and unamortized discounts, excludes accrued interest, and includes non-guaranteed debt directly incurred by commercial Crown corporations and debt guaranteed by the Province.

Social housing's debt includes public-private partnership obligations of $83 million for fiscal 2016/17, $80 million for fiscal 2017/18, $76 million for fiscal 2018/19, and $71 million for fiscal 2019/20.

Post-secondary institutions' debt includes public-private partnership obligations of $56 million for fiscal 2016/17, $60 million for fiscal 2017/18, $60 million for fiscal 2018/19, and $60 million for fiscal 2019/20.

Reflects a onetime shift of $3.5 billion in 2017/18 related to the reclassification of Port Mann Bridge debt from self-supported to taxpayer-supported due to the elimination of tolls effective September 1, 2017.


Budget 2017 Update – 2017/18 to 2019/20

Taxpayer-supported debt is forecast to increase by $7.1 billion to $48.6 billion by 2019/20, over 2016/17. This increase includes the reclassification of $3.5 billion from self-supported debt resulting from government’s decision to cancel tolls on the Port Mann bridge, as well as significant investments in capital infrastructure over the next three years. Debt increases associated with new investments include $2.8 billion for education and health facilities, $3.8 billion for transportation sector projects, and $1.7 billion for other initiatives over the three year period.

The impact of capital debt increases are partially mitigated by an acceleration of the decline in operating debt, which is now forecast to be eliminated by the end of 2019/20. This will be the first time government has been operating debt free since the mid 1970s.

Taxpayer-supported debt levels overall remain low relative to recent fiscal years. Before the onetime impact of the Port Mann bridge debt reclassification, debt to GDP is lower than forecast in Budget 2017.

Chart 1.X Declining operating debt

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16/17 17/18 18/19 19/20 20/21

Budget 2017 Update

Budget 2017

$ billions

Chart 1.7 Declining operating debt

Chart 1.X2 Debt to GDP trend remains affordable

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Budget 2017 Update -before TI Corp reclassification

Budget 2017

Per centBudget 2017

Update

Onetime impact of Port Mann

Chart 1.8 Debt to GDP trend remains affordable

Budget 2017 Update – 2017/18 to 2019/20


The self-supported debt of commercial Crown corporations is forecast to end the fiscal plan period at $23.8 billion, $6.6 billion lower than forecast in Budget 2017. The change relates to the reclassification of the Transportation Investment Corporation debt related to Port Mann bridge noted above ($3.5 billion) and the cancellation of the George Massey Tunnel Replacement project ($2.4 billion). Excluding these onetime adjustments, self-supported debt increases by $1.8 billion in financing requirements mainly for capital investments related to improving and expanding British Columbia’s hydro generation assets.

Government’s anticipated borrowing requirements over the fiscal plan period will total $15.8 billion. This total is required to finance government’s new taxpayer-supported ($8.8 billion) and self-supported ($2.9 billion) capital investments, refinance existing debt maturities ($4.1 billion), and address the increase of forecast allowance. These gross borrowing needs are offset by $4.8 billion in maturing debt that will be retired as government’s direct operating debt falls and reducing P3 liabilities to reflect annual service payments made over the fiscal plan period (see Table 1.21).

Total provincial debt is presented consistent with the Debt Summary Report included in the Public Accounts. Debt is shown net of sinking fund investments and unamortized discounts, excludes accrued interest, and includes non-guaranteed debt directly incurred by commercial Crown corporations and debt guaranteed by the Province. The reconciliation between provincial debt and the financial statement debt is shown in Appendix Table A15.

Additional details on government’s outstanding debt are provided in Appendix Tables A17 to A19.

Table 1.21 Provincial Borrowing Requirements

($ millions)Actual

2016/17


Plan 2018/19

Plan 2019/20

Total provincial debt 1 at beginning of year …………… 65,292 65,883 66,777 69,840 New borrowing 2 …………………………………………… 3,561 3,484 6,874 5,248 Direct borrowing by Crown corporations and agencies . 206 111 56 71 Retirement provision 3 requiring refinancing……………… 589 435 (2,484) (2,095) Retirement provision 3 funded internally………………… (3,765) (3,136) (1,383) (308) Net change in total debt ……………..…………………… 591 894 3,063 2,916

Total provincial debt 1 at year end ………………………… 65,883 66,777 69,840 72,756

Annual growth in debt (per cent) ................................... 0.9 1.4 4.6 4.2 1

2New long-term borrowing plus net change in short-term debt.

3


Sinking fund contributions, sinking fund earnings and net maturities of long-term debt (after deduction of sinking fund balances for maturing issues).


Budget 2017 Update – 2017/18 to 2019/20

Relationship between Surplus and Debt

In addition to operating results, the change in debt is impacted by reductions in cash and other working capital changes as well as the debt financing requirements of government’s capital plan. Table 1.22 reconciles the forecast surpluses with changes in debt.

Risks to the Fiscal Plan

Table 1.23 provides the estimated fiscal impacts of the identified sensitivities for some of the key variables in the fiscal plan projections on an individual basis. However, inter-relationships between the variables may cause the actual variances to be higher or lower than the estimates shown in the table. For example, an increase in the US/CDN dollar exchange rate may be partly offset by higher commodity prices.

The assumptions and risk sensitivities for individual revenue sources and major program areas can be found in Appendix Tables A5 and A6, beginning on page 112.

Own Source Revenue

The main areas that may affect own source revenue forecasts are BC’s overall economic performance, the relative health of its major trading partners, the exchange rate and commodity prices.

Table 1.22 Reconciliation of Summary Results to Provincial Debt Changes

($ millions)Actual

2016/17


Plan2018/19

Plan2019/20

Taxpayer-supported debt:Annual surplus (before forecast allowance)……………… (2,737) (546) (528) (607) Reduction in cash balances ............................................ 340 (1,238) (412) (158) Other working capital changes ........................................ 5 (231) 542 (113) Net increase in capital and other assets ......................... 1,171 5,362 2,576 2,489

(1,221) 3,347 2,178 1,611 Self-supported debt:

Commercial Crown corporation capital financing ............ 1,774 (3,029) 902 1,272 Other commercial debt ……………………………………… 38 276 (17) (17)

1,812 (2,753) 885 1,255 Annual change in forecast allowance ............................. - 300 - 50

Annual increase in total provincial debt ………………… 591 894 3,063 2,916

Table 1.23 Key Fiscal SensitivitiesAnnual Fiscal Impact

Variable Increases of ($ millions)

Nominal GDP ……………………………………… 1% $150 – $250Lumber prices (US$/thousand board feet) ……… $50 $75 – $100 1

Natural gas prices (Cdn$/gigajoule) ……………… 25 cents $60 – $70 2

US exchange rate (US cent/Cdn $) ……………… 1 cent -$25 to -$50Interest rates ………………………………………… 1 percentage point -$58Debt ………………………………………………… $500 million -$11 to -$131 Sensitivity relates to stumpage revenue only. 2 Sensitivities can vary significantly especially at lower prices.

Budget 2017 Update – 2017/18 to 2019/20


Revenues are sensitive to economic performance. For example, taxation and other revenue sources are driven by economic factors such as household income, consumer expenditures, housing starts, employment, population growth and the exchange rate. The revenue forecast contained in the fiscal plan is based on the economic forecast detailed in Part 3: British Columbia Economic Review and Outlook. As well, it incorporates commodity price forecasts developed by the Ministry of Forests, Lands, Natural Resource Operations and Rural Development and the Ministry of Energy, Mines and Petroleum Resources based on private sector information.

Income tax revenue forecasts are based on projections of household income and net operating surpluses of corporations. The forecasts are updated from reports on tax assessments provided by the Canada Revenue Agency. As a result, revenue estimates can be affected by timing lags in the reporting of current and prior year tax assessments by the Canada Revenue Agency.

Adjustments to the harmonized sales tax entitlements for the years 2010/11 to 2012/13 will continue until 2019/20. These changes, determined by the federal government, could affect the revenue forecast over the three-year plan. However it is expected that the size of these changes will diminish over time.

Revenues in British Columbia can also be volatile, largely due to the influence of the cyclical natural resource sector in the economy and the importance of natural resource revenues in the Province’s revenue base. Changes in commodity prices such as natural gas, lumber or coal may have a significant effect on natural resource revenues and economic growth.

Details on major assumptions and sensitivities resulting from changes to those assumptions are outlined in Appendix Table A5.

Softwood Lumber Dispute

Following the expiry of the 2006 Softwood Lumber Agreement, the US launched new countervailing (CVD) and anti-dumping (AD) duty trade sanctions against Canadian softwood lumber imports. These trade actions are baseless and without merit. Preliminary CVD duties were imposed in April and AD duties in June 2017, and on average amount to 27 per cent in total. Canada has steadfastly maintained and argued that lumber exports to the US are not subsidized and NAFTA tribunals have generally ruled in Canada’s favour. The BC government continues to support Canada’s efforts to negotiate with the US, prepare its defence for any new litigation if necessary, and to continue to expand other markets for BC forest products. The uncertainty of trade actions can lead to market volatility which will hurt Canadian exporters and US consumers of lumber. The impacts of any trade actions taken by the US, including the imposition of CVD and AD duties on Canadian softwood lumber, represent key risks to the economic and fiscal projections. For further information, see the topic box beginning on page 56.

Federal Government Contributions

Potential policy changes regarding federal government allocations, including health and social transfers and cost-sharing agreements, could affect the revenue and the expenditure forecasts.


Budget 2017 Update – 2017/18 to 2019/20

Crown Corporations

Crown corporations have provided their own forecasts. These forecasts, as well as their statements of assumptions, were used to prepare the fiscal plan. The boards of those corporations and agencies have also included these forecasts, along with further details on assumptions and risks, in the service plans being released with the budget. Net income from the BC Lottery Corporation may be impacted from the results of ongoing consultations with stakeholders concerning any transitional changes to the commission structure in its Casino and Community Gaming division.

SUCH Sector

Health authorities have submitted an overall balanced financial plan for 2017/18 to 2019/20 based on policy assumptions provided by the Ministry of Health. The individual plans have been signed off by the board chairs of the respective health authorities. The Ministry of Health will continue to work with the health authorities to manage any emerging revenue and spending risks and spending pressures.

Forecasts for the universities, colleges, and institutions have been signed off by chairs of the board or audit committee and lead financial officers.

Forecasts for the combined school districts have been compiled by the Ministry of Education based on the requirements of the School Act, the current year plans developed by the school districts, and ministry policy assumptions respecting future funding allocations. Variances from these assumptions could impact the fiscal plan.

Spending

Government funds a number of demand-driven programs, including those delivered through third party delivery agencies, such as health care, K-12 and post-secondary education, income assistance, and community social services. The budgets for these programs reflect reasonable estimates of demand and other factors such as price inflation. If demand is higher than estimated, this will result in a spending pressure to be managed.

The spending plans for the Ministry of Forests, Lands, Natural Resource Operations and Rural Development and the Ministry of Public Safety and Solicitor General include base amounts to fight wildfires and deal with other emergencies such as floods. Unanticipated or unpredictable occurrences may affect expenses in these ministries.

Details on major assumptions and sensitivities resulting from changes to those assumptions are shown in Appendix Table A7 and in ministry service plans.

Treaty Negotiations and Revenue Sharing

BC continues to negotiate treaties and incremental treaty agreements with a number of First Nations. While implementation and settlement costs associated with existing Final Agreements have been accounted for in the fiscal plan, the outcomes of other treaty negotiations and their ratification processes would need to be managed within the fiscal plan.

Government is also committed to negotiating new revenue-sharing agreements and other reconciliation agreements with First Nations to streamline consultation on natural resource decisions, provide increased certainty for investors, and provide new economic

Budget 2017 Update – 2017/18 to 2019/20


opportunities to First Nations communities. Where agreements have been concluded, the costs of those agreements have been accounted for in the fiscal plan. Any future agreements will need to be accommodated within the fiscal plan.

The Province is also involved in litigation with First Nations relating to aboriginal rights. Settlement of these issues, either in or out of court, may result in additional costs to government.

Capital Risks

The capital spending forecasts included in the fiscal plan may be affected by subsequent planning (i.e. design development) and procurement activities (i.e. receipt/review of construction bids) resulting in project costs that are higher than the initial approved budgets. For large capital projects, government will review the budget and scope risks, and the strategies to mitigate these risks.

Other risks impacting capital spending forecasts include:• weatherandgeotechnicalconditions,includingtheoutcomeofenvironmentalimpact

studies, causing project delays and/or unexpected costs;• changesinmarketconditions,includingservicedemand,theimpactofinflationon

building material costs, the availability of and wage rates for skilled workers, and borrowing costs;

• theaccuracyofcapitalprojectbudgetandconstructionscheduleforecasts;• thesuccessfulnegotiation/timingofcost-sharingagreementswiththefederal

government and other funding partners; and• thetimingandoutcomesofpublic-privatesectorpartnershipnegotiations.

Pending Litigation

The spending plan for the Ministry of the Attorney General contains provisions for payments under the Crown Proceeding Act based on estimates of expected claims, judgments, and related costs of settlements likely to be incurred. Litigation developments may occur that are beyond the assumptions used in the plan (for example, higher-than-expected volumes, or size of claim amounts and timing of judgments and settlements). These developments may affect government revenues and/or expenditures in other ministries.

Write-downs and Other Adjustments

Ministry budgets provide for anticipated levels of asset or loan write-downs where estimates can be reasonably predicted. The overall spending forecast does not make allowance for extraordinary items other than the amount provided in the Contingencies vote.

Prudence and Risk

The economic, financial and external variables and factors that impact the estimates of revenues, expenditures, capital spending and debt will change throughout the year as new information becomes available with potentially material impacts. As a result, the actual operating surplus, capital expenditure and debt figures may differ from the current forecast. Government will continue to update the fiscal plan throughout the year.


Budget 2017 Update – 2017/18 to 2019/20

Government incorporates four main levels of prudence to help mitigate risks to the budget plan projections:• TheMinistryofFinance’seconomicoutlookislowerthantheaverageoftheforecasts

provided by the members of the Economic Forecast Council (EFC). The Budget 2017 Update plan assumes annual real GDP growth of 2.9 per cent in 2017, 2.1 per cent in 2018, and 2.0 per cent over the medium term. This is lower than the EFC average by 0.1 percentage point in 2017 and 0.2 percentage points in each following year of the Budget 2017 Update. The prudent outlook compared to the private sector acknowledges the downside risks to the economic forecast over the forecast horizon.

• TheBudget 2017 Update natural gas price forecast is lower than the private sector average over the next three years reflecting the recommendation of Dr. Tim O’Neill in 2013 to adopt more caution in preparing the natural gas royalty forecast. Over the ensuing three years, the Budget 2017 Update natural gas price projection averages 40 cents lower than the average of the private sector forecasters (see Appendix Table A6 for details).

• Budget 2017 Update includes forecast allowances of $300 million in each of 2017/18 and 2018/19, and $350 million in 2019/20. The forecast allowance helps guard against unanticipated revenue volatility and statutory spending such as additional costs to fight wildfires, to deal with other emergencies such as floods and for litigation developments under the Crown Proceeding Act.

• TheBudget 2017 Update expense forecast also includes a Contingencies vote allocation of $600 million in 2017/18, $300 million in 2018/19 and $350 million in 2019/20. The Contingencies vote is a prudent measure to help protect the plan from unforeseen and unbudgeted costs that may arise and to fund priority initiatives.

The EFC provides advice to the Minister of Finance annually on issues facing the global economy and BC’s economic outlook including areas of concern, risks and opportunities for the BC economy. The Minister of Finance consults with staff and colleagues on the various levels of prudence incorporated in the fiscal plan, tax policy initiatives for consideration and the potential risks that could arise over the next three years. Since the risks could be ongoing or one-time in nature and could impact both revenues and expenditures, consideration is given to both the forecast allowance and Contingencies vote allocations. However, since a number of these risks are not readily quantifiable, there is no specific formulaic approach in the determination of the forecast allowance and Contingencies vote allocations.

Following advice provided by staff and colleagues, the Minister of Finance determines the levels of additional prudence to incorporate in the forecast allowance and Contingencies vote; tax policy measures to implement; and a credible level of operating surplus underlying the budget and fiscal plan. The determination of the level of any of these is not done in isolation as all of the above elements must be considered in the fiscal plan projections. A discussion of fiscal risks is included in this section of the budget document and risks to the economic outlook are summarized on page 78. See Part 2: Tax Measures for a discussion on tax policy initiatives in Budget 2017 Update.


Budget 2017 Update – 2017/18 to 2019/20

Fiscal Sustainability Review

The Broader Provincial Public Sector

Chart 1 shows that under the provincial Budget Transparency and Accountability Act, the Province’s budgeting and reporting framework includes all of the operations of central government (ministries), provincial Crown corporations and the public schools, universities, colleges and health (SUCH) sector.

The Ministry of Finance presents three-year forecasts of revenue, expenditure, capital and debt as part of the annual Budget and Three-Year Fiscal Plan. Also included is an analysis of key sensitivities and risks underpinning the forecasts. These forecasts, and the Province’s ability to identify and mitigate risks, rely on information provided by ministries; Crown corporations and agencies; as well as the broader SUCH sector.

The Province’s annual bottom-line surplus (deficit) is simply the difference between two very large numbers – total revenues and total spending. Changes on either side can have negative, positive and sometimes offsetting effects on the Province’s bottom line.

Provincial Budgeting and Reporting Framework

1

SUCH Sector

Crown Corporations/ Agencies Sector

Central Government Consolidated Revenue Fund

(Ministries)

Chart 1Chart 1 Provincial budgeting and reporting framework


Budget 2017 Update – 2017/18 to 2019/20

Net income (losses) of commercial Crown corporations are included as part of the Province’s revenue forecasts. While not the largest segment of provincial revenues, Chart 2 shows that over the last 8 years, final results can vary significantly – which affects the accuracy and stability of the overall provincial planning framework.

Spending through the SUCH sector agencies makes up about half of all provincial spending and Chart 3 shows that final results have varied significantly from budget, particularly in the last 3 years. There are a variety of reasons for these changes. 2

Chart 2

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Chart 2 Commercial Crown corporation changes from budget forecast

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Spending Above Budget

Chart 3 Schools, universities, colleges and health sector (SUCH) spending changes from budget forecast


Budget 2017 Update – 2017/18 to 2019/20

The Province’s debt and cash management plan is also integral to achieving its overall Budget and Three-Year Fiscal Plan targets. Chart 4 illustrates how capital spending forecasts – largely financed through provincial borrowing – have changed compared to original budget projections over the last 8 years for selected provincial agencies.

Management of surplus cash balances is also a key part of helping to ensure that provincial borrowing needs are minimized where possible. Chart 5 shows that opportunities still remain for working with Crown corporations and broader SUCH agencies to reduce surplus cash balances as alternatives to borrowing.

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Chart 4 Capital spending changes from budget forecast

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Chart 5 Provincial year-end cash and equivalent balances


Budget 2017 Update – 2017/18 to 2019/20

The existence of well-structured and effective management, reporting, accountability and risk identification and mitigation systems throughout the provincial public sector are critical in helping the Province to manage its overall operations and finances.

As part of its planning and development work, the Ministry of Finance is undertaking a review and assessment of the quality of financial and other information impacting baseline assumptions to be used for developing Budget 2018 and Three-Year Fiscal Plan (Fiscal Sustainability Review).

The mandate of this Review is to assess the quality of financial and other information produced and submitted by certain significant Crown corporations and SUCH sector entities to the Province, and to identify ways that will enhance the Province’s ability to manage forecast changes and risks to its overall fiscal plan – and therefore fiscal sustainability – in the near and longer term.

The Insurance Corporation of British Columbia is one such entity to be reviewed and the government expects that these Review findings will further assist in a broader operational review planned for the corporation by the ministry responsible.


Budget 2017 Update – 2017/18 to 2019/20

80 ground-attack vehicles and additional short term contractors brought in as needed.The BC Wildfire Service has facilities in strategic locations across the province to facilitate a rapid response to wildfires. This includes six Fire Centres, primary attack bases, secondary attack bases, forward attack bases and air tanker bases. In support of this critical infrastructure, the Budget 2017 Update commits additional capital funding of $15 million over three years to invest in upgrades to wildfire facilities throughout the province.

Wildfire Prevention

Wildfire prevention is a shared responsibility between the public, business, First Nations, local governments and the Province.Since 2004, the Province has provided the Strategic Wildfire Prevention Initiative with $78 million. The Strategic Wildfire Prevention Initiative is a suite of funding programs administered by the Union of BC Municipalities. The initiative supports communities to mitigate risk from wildfire in the wildland urban interface.Government has invested $235 million in the Forest Enhancement Society of BC. Over the next three years, the Forest Enhancement Society of BC will be funding projects totaling over $140 million focused on wildfire risk reduction, reforestation, wildlife habitat restoration and raising awareness of the FireSmart program.

Education and Enforcement

Nearly half of all wildfires each year are caused by human activity, so the BC Wildfire Service puts an emphasis on wildfire prevention, public education and enforcement. During each wildfire season, the BC government runs media campaigns focused on wildfire prevention. Anyone found in contravention of an open burning prohibition may be issued a ticket for up to $100,000 and/or sentenced to one year in jail. If the contravention causes or contributes to a wildfire, the person responsible may be ordered to pay all firefighting costs.

Unprecedented Wildfire Season

The 2017 wildfire season is the most extensive on record and has consumed more than one million hectares of forest surpassing the record set in 1958.Given the wildfire situation, the Province declared a provincial state of emergency in July to allow BC to bring in additional resources when and as needed to ensure public safety and protect key infrastructure. A Wildfire Cabinet Task Force has also been established to guide the development of recommendations to government in wildfire prevention, mitigation and response and is working closely with the federal government to ensure that the necessary supports are in place to assist all those impacted by the wildfires.In support of those impacted by wildfires, the Province has committed $100 million in funding which is being administered by the Canadian Red Cross. Supports provided by the Red Cross include grants of at least $600 for each evacuated household that registers with the Canadian Red Cross and grants of $1,500 for eligible businesses, First Nations and non-profit organizations located in areas that have been under evacuation order or alert to assist with resuming operations.The federal government is matching the support offered by the Province. The public can make donations to support those impacted by the wildfires through the Canadian Red Cross’s British Columbia Fires Appeal program available on their website.

Wildfire Management

The BC Wildfire Service is responsible for managing wildfires through a combination of wildfire prevention, mitigation and suppression strategies, on both Crown and private land outside of municipalities or regional districts. More than 1,600 firefighters and support staff are deployed for the 2017 wildfire season in addition to over 2,500 private contractor firefighting resources and a multitude of contingency resources (including those in other provinces). The BC Wildfire Service has access to 32 fixed-wing aircraft and helicopters, about

Wildfire Management


Budget 2017 Update – 2017/18 to 2019/20

The US Has Launched Trade Litigation that is Unwarranted, and Leads to Disruptive Market Uncertainty – Both the US and Canada Lose

Following the expiry of the 2006 Softwood Lumber Agreement (2006 SLA), the US launched new countervailing (CVD) and anti-dumping (AD) duty trade actions against Canadian softwood lumber imports. These trade actions are baseless and without merit. Preliminary CVD duties were imposed in April and AD duties in June 2017, and on average amount to 27 per cent in total. Table 1 summarizes the duty rates. Unlike the previous four cases, in this fifth round of US litigation both CVD and AD duties were calculated for specific companies, with other exporters paying the weighted-average “all others” rate.

The US Department of Commerce announced they are extending their final determination until no later than November 13, 2017. The final determinations had previously been scheduled for September 6, 2017. This allows additional time for Canada and the US to try to reach a negotiated settlement to the dispute. The final orders will not be issued until both the Department of Commerce and the International Trade Commission have made their final determinations. At that time, Canada may appeal the rulings in international venues including under the North American

Reliable, Predictable Access to the US Lumber Market is of Vital Importance to BC and to Americans

BC’s forest products industry includes businesses focussed on forest management, harvesting, reforestation, wood and paper product manufacturing, and a host of other value-added and innovative forest products production. The sector is export-oriented, depending heavily on global markets and exchange rates, and is thus affected by the general performance of the world economy and the economic performance of BC’s trading partners.

The forest products sector accounts for over 3 per cent of provincial GDP, and about 30 per cent of manufacturing GDP. In 2016, the forest products sector contributed about $7.4 billion to provincial GDP and directly employed about 60,000 people. In 2016, the forest sector accounted for 30 per cent of BC manufacturing sales ($13.8 billion), and about 36 per cent of total BC international merchandise export value ($14.0 billion). Provincial government forest revenue in 2016/17 amounted to $0.9 billion.

Lumber is the key component of the BC forest sector and in 2016, lumber production accounted for $5.5 billion of manufacturing sales. BC’s lumber is exported around the world, with the US (65.8 per cent), China (14.8 per cent) and Japan (10.5 per cent) being the top three markets.

In 2016, the US imported 15.1 billion feet of softwood lumber from Canada with over 50 per cent coming from BC. US based producers cannot supply enough lumber to meet domestic demand.

Impacts and Outlook for Softwood Lumber Dispute on British Columbia and the United States

Table 1 Countervailing and anti-dumping duty ratesCompany Countervailing Anti-dumping Total

West Fraser ……… 24.12% 6.76% 30.88%Canfor …………… 20.26% 7.72% 27.98%Tolko ……………… 19.50% 7.53% 27.03%Resolute ………… 12.82% 4.59% 17.41%J.D. Irving ………… 3.02% 6.87% 9.89%All others ………… 19.88% 6.87% 26.75%


Budget 2017 Update – 2017/18 to 2019/20

Free Trade Agreement (NAFTA) and the World Trade Organization. In addition, the US will perform annual ‘administrative reviews’ to review and revise the duty rates. Both NAFTA appeals and administrative reviews can retroactively revise duty rates, creating great uncertainty about the final impact on the lumber sector. This uncertainty can lead to market volatility which will hurt both Canadian exporters and US consumers of lumber.

Aside from Free Trade, a Negotiated Settlement is the Preferred Option and Canada and the US Governments Have Been Working to Find a Workable Solution

While BC would prefer free access to US markets, a managed trade agreement that provides market certainty, such as the 2006 SLA, is a better solution for both countries than ongoing trade litigation. Senior government officials from Canada and the US have been working to find resolution to this recent dispute. While some progress has been made, it is uncertain whether a new agreement will be reached in 2017. In the previous round of litigation, it took 5 years and significant legal victories for Canada in international courts before the parties settled.

Impacts of Duties on BC and the US

With expected growth in US housing starts, lumber demand is forecast to keep increasing. Since Canadian lumber is a critical part of the US construction industry’s supply chain, the recent imposition of duties on Canadian lumber has resulted in higher prices for American lumber consumers. These higher lumber prices have partially offset the negative impacts of duties on BC exporters. However, some BC communities and residents that are highly reliant on the BC forest sector may be adversely affected from the increased uncertainty and volatility from the trade dispute.

The National Association of Home Builders estimates that the duties will lead to an annual loss of over 11,000 American jobs and cost US governments $0.5 US billion in taxes and other revenue.

For more information see the BC government softwood lumber website:

www.gov.bc.ca/softwoodlumber

http://www.gov.bc.ca/softwoodlumber

Budget 2017 Update – 2017/18 to 2019/20

Part 2: TAX MEASURES

Table 2.1 Summary of Tax Measures

Effective Date 2017/18 2018/19

Income Tax Act• Introduce new personal income tax rate of 16.8 per cent on taxable income

over $150,000 ………………………………………………………………………… 2018 tax year 67 273 • Increase dividend tax credit rate for eligible dividends …………………………… 2019 tax year - (19) • Decrease dividend tax credit rate for ineligible dividends ………………………… 2017 tax year 14 15 • Increase low income climate action tax credit ……………………………………… April 1, 2018 - (40) • Introduce BC back-to-school tax credit for the 2016 tax year only ……………… 2016 tax year - -• Introduce tax credit for volunteer firefighters and search and rescue

volunteers ……………………………………………………………………………… 2017 tax year (1) (1) • Eliminate children's fitness, children's fitness equipment and children's

arts tax credits ………………………………………………………………………… 2018 tax year 3 11 • Extend BC mining flow-through share tax credit …………………………………… January 1, 2017 (4) (1) • Reduce small business corporate income tax rate to 2 per cent ………………… April 1, 2017 (79) (81) • Increase general corporate income tax rate to 12 per cent ……………………… January 1, 2018 102 306 • Restore preferential tax benefit for credit unions ………………………………… January 1, 2017 (7) (10) • Extend scientific research and experimental development tax credit …………… September 1, 2017 (96) (175) • Adjust interactive digital media tax credit principal business

requirement …………………………………………………………………………… February 22, 2017 (4) (4) • Allow eligible business corporations participating in the small

business venture capital program to claim interactive digital mediatax credit ……………………………………………………………………………… February 22, 2017 * *

• Adjust boundary for regional film tax credits ……………………………………… January 25, 2017 * *• Expand mining exploration tax credit to include costs incurred for

environmental studies and community consultations ……………………………… March 1, 2015 (2) (2) • Extend training tax credits .................................................................................. January 1, 2018 (6) (19) • Extend book publishing tax credit …………………………………………………… April 1, 2017 (3) -

International Business Activity Act• Eliminate international business activity program ………………………………… September 12, 2017 5 10

Small Business Venture Capital Act• Increase equity tax credit budget by $3.5 million ………………………………… 2017 tax year (4) (4)

Medicare Protection Act• Reduce Medical Services Plan premiums by 50 per cent for 2018 ……………… January 1, 2018 (311) (1,245)

Carbon Tax Act• Increase carbon tax rates by $5 per tonne of CO2 equivalent emissions

annually for four years ………………………………………………………………… April 1, 2018 - 212 • Repeal Part 2 of the Carbon Tax Act ……………………………………………… Royal Assent - -

Provincial Sales Tax Act• Phase out tax on electricity …………………………………………………………… Regulation (21) (82)

Tobacco Tax Act• Increase tobacco tax rates to 24.7 cents per cigarette/gram of tobacco ……… Regulation 8 25

Motor Fuel Tax Act• Exempt natural gas used as locomotive fuel ……………………………………… Regulation * *

Property Transfer Tax Act• Increase threshold for First Time Home Buyers' Program exemption to

$500,000 ……………………………………………………………………………… February 22, 2017 (2) (2)

* Denotes measures that have no material impact on taxpayers.

Taxpayer Impacts

($ millions)

60 Tax Measures

Budget 2017 Update – 2017/18 to 2019/20

Income Tax Act

New Personal Income Tax Rate of 16.8 Per Cent on Taxable Income Over $150,000 Introduced

A new top personal income tax bracket is introduced effective for the 2018 and subsequent tax years. The income threshold for the new top bracket will be set at $150,000 in 2018. Taxable income exceeding $150,000 will be subject to a provincial personal income tax rate of 16.8 per cent. This increases the rate of tax from 14.7 per cent to 16.8 per cent on taxable income over $150,000.

Dividend Tax Credit Rate for Eligible Dividends Increased

British Columbia provides a dividend tax credit to prevent double taxation of dividend income that has already been taxed at the corporate level.

As a result of increasing the general corporate income tax rate to 12 per cent from 11 per cent, the dividend tax credit rate on eligible dividends is increased to 43 and 11/19ths per cent from 36 and 6/19ths per cent, effective for the 2019 and subsequent tax years.

Tax Measures — Supplementary InformationFor more details on tax changes see:www.gov.bc.ca/budgettaxchanges

Table 2.1 Summary of Tax Measures (continued )

Effective Date 2017/18 2018/19

Home Owner Grant Act• Increase threshold for home owner grant phase-out to $1.6 million …………… 2017 tax year (48) (48)

School Act• Set provincial residential class school property tax rates ………………………… 2017 tax year * *• Set provincial non-residential class school property tax rates …………………… 2017 tax year * *

Taxation (Rural Area) Act• Set provincial rural area property tax rates ………………………………………… 2017 tax year * *

Home Owner Grant Act and Income Tax Act• Improve information sharing ………………………………………………………… Royal Assent - -

Total ………………………………………………………………………………………… (389) (881)

* Denotes measures that have no material impact on taxpayers.

Taxpayer Impacts

($ millions)

http://www.gov.bc.ca/budgettaxchanges

Budget 2017 Update – 2017/18 to 2019/20

Tax Measures 61

Dividend Tax Credit Rate for Ineligible Dividends Decreased

British Columbia provides a dividend tax credit to prevent double taxation of dividend income that has already been taxed at the corporate level.

As a result of reducing the small business corporate income tax rate to 2 per cent from 2.5 per cent, the dividend tax credit rate on ineligible dividends is decreased to 15 per cent from 17 per cent, effective for the 2017 and subsequent tax years.

Low Income Climate Action Tax Credit Increased

Effective April 1, 2018, the maximum annual low income climate action tax credit is increased to $135 per adult from $115.50, and to $40 per child from $34.50, with single parent families continuing to receive the adult amount for the first child in the family.

BC Back-to-School Tax Credit Introduced

A new non-refundable BC back-to-school tax credit is introduced. The credit is available to individuals with school-aged children (five to 17 years of age). The tax credit amount is $250 per child, providing a tax benefit of up to $12.65 per child. The credit is available for the 2016 tax year only.

Tax Credit for Volunteer Firefighters and Search and Rescue Volunteers Introduced

A new non-refundable volunteer firefighters and search and rescue volunteers tax credit is introduced.

The tax credit is available to British Columbians who provide at least 200 hours of volunteer service to either a volunteer fire department, an eligible search and rescue organization, or a combination of both. The credit amount is $3,000, providing a tax benefit of up to $151.80 per eligible taxpayer. The tax credit is available for the 2017 and subsequent taxation years.

Children’s Fitness, Children’s Fitness Equipment and Children’s Arts Tax Credits Eliminated

The children’s fitness tax credit, children’s fitness equipment tax credit and children’s arts tax credit are eliminated effective for the 2018 and subsequent tax years.

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Budget 2017 Update – 2017/18 to 2019/20

BC Mining Flow-Through Share Tax Credit Extended

The BC mining flow-through share tax credit is extended to the end of 2017.

Small Business Corporate Income Tax Rate Reduced to 2 Per Cent

The small business corporate income tax rate is reduced to 2 per cent from 2.5 per cent effective April 1, 2017, a reduction of 20 per cent.

General Corporate Income Tax Rate Increased to 12 Per Cent

The general corporate income tax rate is increased to 12 per cent from 11 per cent effective January 1, 2018.

Preferential Tax Benefit for Credit Unions Restored

Prior to 2013, credit unions received federal and provincial preferential corporate income tax treatment by way of a lower tax rate on a portion of their income. In 2013, the federal government began a five-year phase-out of its preferential tax treatment. Budget 2014 announced that the provincial preferential tax treatment for credit unions would be extended three years, after which it would be phased out over five years beginning in 2016.

Budget 2017 Update cancels the phase-out and restores the full provincial preferential income tax treatment for credit unions effective January 1, 2017.

Scientific Research and Experimental Development Tax Credit Extended

The scientific research and experimental development tax credit is extended for five years to August 31, 2022.

Interactive Digital Media Tax Credit Principal Business Requirement Adjusted

Currently, to be eligible for the interactive digital media tax credit, a corporation’s principal business must be the development of interactive digital media products. Effective for tax years that end on or after February 22, 2017, corporations that have annual qualifying BC labour expenses greater than $2 million do not need to meet this requirement.

Budget 2017 Update – 2017/18 to 2019/20

Tax Measures 63

Eligible Business Corporations Participating in the Small Business Venture Capital Program Allowed to Claim Interactive Digital Media Tax Credit

Effective for tax years that end on or after February 22, 2017, interactive digital media corporations participating in the small business venture capital program are eligible for the interactive digital media tax credit.

Boundary for Regional Film Tax Credits Adjusted

For the purposes of the regional film tax credits, the southern part of the eastern boundary of the designated Vancouver area is moved from 200th Street in Langley to the border between Surrey and Langley. This change is effective for productions with principal photography beginning on or after January 25, 2017. As a result, the regional film tax credits apply in all of the City of Langley and the Township of Langley. This change applies to both the Film Incentive BC tax credit and the production services tax credit.

Mining Exploration Tax Credit Expanded to Include Costs Incurred for Environmental Studies and Community Consultations

The mining exploration tax credit is expanded to allow the costs of environmental studies and community consultations incurred after February 28, 2015 to be included in the calculation of the mining exploration tax credit. The credit is calculated as 20 per cent of eligible BC mining exploration expenditures, or 30 per cent if exploration is in the mountain-pine-beetle-affected area.

Training Tax Credits Extended

The BC training tax credits are extended for one year to the end of 2018.

Book Publishing Tax Credit Extended

The book publishing tax credit is extended for one year to March 31, 2018.

International Business Activity Act

International Business Activity Program Eliminated

Effective September 12, 2017, international business activities no longer qualify for personal and corporate income tax refunds.

Small Business Venture Capital Act

Equity Tax Credit Budget Increased by $3.5 Million

Effective for 2017 and subsequent years, the budget for the small business venture capital tax credit is increased to $38.5 million from $35 million. This allows for up to $11.7 million in additional equity financing for qualifying corporations annually.

64 Tax Measures

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Medicare Protection Act

Medical Services Plan Premiums Reduced by 50 Per Cent for 2018

Effective for 2018, Medical Services Plan (MSP) premiums are reduced by 50 per cent.

In addition, the income threshold at which households are fully exempt from MSP premiums is increased by $2,000 (see Table 2.2).

With these changes, single individuals and single parents will save up to $450 per year and couples will save up to $900 per year.

Annual Household Net Income

Monthly Premiums in

2017

Monthly Premiums in

2018Monthly

Decrease Annual

Decrease

-------------------------------------- $ --------------------------------------Single Individual Up to $24,000 …………………………… 0.00 0.00 0.00 0.00 $24,001 to $26,000 ……………………… 11.00 0.00 (11.00) (132.00) $26,001 to $28,000 ……………………… 23.00 11.50 (11.50) (138.00) $28,001 to $30,000 ……………………… 35.00 17.50 (17.50) (210.00) $30,001 to $34,000 ……………………… 46.00 23.00 (23.00) (276.00) $34,001 to $38,000 ……………………… 56.00 28.00 (28.00) (336.00) $38,001 to $42,000 ……………………… 65.00 32.50 (32.50) (390.00) Over $42,000 …………………………… 75.00 37.50 (37.50) (450.00)

Couple Up to $27,000 …………………………… 0.00 0.00 0.00 0.00 $27,001 to $29,000 ……………………… 22.00 0.00 (22.00) (264.00) $29,001 to $31,000 ……………………… 46.00 23.00 (23.00) (276.00) $31,001 to $33,000 ……………………… 70.00 35.00 (35.00) (420.00) $33,001 to $37,000 ……………………… 92.00 46.00 (46.00) (552.00) $37,001 to $41,000 ……………………… 112.00 56.00 (56.00) (672.00) $41,001 to $45,000 ……………………… 130.00 65.00 (65.00) (780.00) Over $45,000 …………………………… 150.00 75.00 (75.00) (900.00)

Senior Couple Up to $33,000 …………………………… 0.00 0.00 0.00 0.00 $33,001 to $35,000 ……………………… 22.00 0.00 (22.00) (264.00) $35,001 to $37,000 ……………………… 46.00 23.00 (23.00) (276.00) $37,001 to $39,000 ……………………… 70.00 35.00 (35.00) (420.00) $39,001 to $43,000 ……………………… 92.00 46.00 (46.00) (552.00) $43,001 to $47,000 ……………………… 112.00 56.00 (56.00) (672.00) $47,001 to $51,000 ……………………… 130.00 65.00 (65.00) (780.00) Over $51,000 …………………………… 150.00 75.00 (75.00) (900.00)

Single Parent – Two Children * Up to $30,000 …………………………… 0.00 0.00 0.00 0.00 $30,001 to $32,000 ……………………… 11.00 0.00 (11.00) (132.00) $32,001 to $34,000 ……………………… 23.00 11.50 (11.50) (138.00) $34,001 to $36,000 ……………………… 35.00 17.50 (17.50) (210.00) $36,001 to $40,000 ……………………… 46.00 23.00 (23.00) (276.00) $40,001 to $44,000 ……………………… 56.00 28.00 (28.00) (336.00) $44,001 to $48,000 ……………………… 65.00 32.50 (32.50) (390.00) Over $48,000 …………………………… 75.00 37.50 (37.50) (450.00)

Couple – Two Children * Up to $33,000 …………………………… 0.00 0.00 0.00 0.00 $33,001 to $35,000 ……………………… 22.00 0.00 (22.00) (264.00) $35,001 to $37,000 ……………………… 46.00 23.00 (23.00) (276.00) $37,001 to $39,000 ……………………… 70.00 35.00 (35.00) (420.00) $39,001 to $43,000 ……………………… 92.00 46.00 (46.00) (552.00) $43,001 to $47,000 ……………………… 112.00 56.00 (56.00) (672.00) $47,001 to $51,000 ……………………… 130.00 65.00 (65.00) (780.00) Over $51,000 …………………………… 150.00 75.00 (75.00) (900.00)

Table 2.2 Impact of Medical Services Plan Premium Changes (For premium and premium assistance changes effective January 1, 2018)

* Income thresholds may vary for families who claim child care expenses on their tax returns.

Budget 2017 Update – 2017/18 to 2019/20

Tax Measures 65

Carbon Tax Act

Carbon Tax Rates Increased by $5 per Tonne of CO2 Equivalent Annually

Effective April 1, 2018, carbon tax rates are increased by $5 per tonne of carbon dioxide equivalent emissions (CO2e) annually until rates are equal to $50 per tonne of CO2e on April 1, 2021.

Part 2 of the Carbon Tax Act Repealed

Part 2 of the Carbon Tax Act is repealed. Following Budget 2017 Update, the requirement to prepare the Carbon Tax Report and Plan will no longer apply. In addition, this means the Carbon Tax Act will no longer require that revenue measures be introduced to offset carbon tax revenues. This will allow the government to spend carbon tax revenues on measures that reduce emissions.

Provincial Sales Tax Act

Tax on Electricity Phased Out

The provincial sales tax on taxable electricity is phased out. Effective on a date to be specified by regulation, the tax rate on electricity is reduced to 3.5 per cent from 7 per cent of the purchase price. Once the legislation receives royal assent, government intends to provide at least one month of notice before this change takes effect. Effective April 1, 2019, electricity is fully exempt from provincial sales tax.

Tobacco Tax Act

Tobacco Tax Rates Increased to 24.7 Cents per Cigarette/Gram of Tobacco

Effective on a date to be specified by regulation, the tax rate on cigarettes is increased to $49.40 from $47.80 per carton of 200 cigarettes, and the tax rate on fine-cut tobacco is increased to 24.7 cents from 23.9 cents per gram. Once the legislation receives royal assent, government intends to provide at least one month of notice before this change takes effect.

Motor Fuel Tax Act

Natural Gas Used as Locomotive Fuel Exempted

Effective on a date to be specified by regulation, natural gas for use in an internal combustion engine for any rolling stock or vehicle when run on rails is exempt from the 3 cent per litre tax on locomotive fuel. Government intends to provide at least one month of notice before this change takes effect.

The motor fuel tax exemption for natural gas used as locomotive fuel is consistent with the motor fuel tax exemptions for natural gas used in motor vehicles or used in a ship.

Property Transfer Tax Act

Threshold for First Time Home Buyers’ Program Exemption Increased to $500,000

Effective for registrations on or after February 22, 2017, the fair market value threshold for eligible residential property under the First Time Home Buyers’ Program is increased to $500,000 from $475,000. The partial exemption continues and now applies to homes valued between $500,000 and $525,000.

With this change, eligible first time home buyers can save up to $8,000 in property transfer tax on the purchase of their home.

66 Tax Measures

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Home Owner Grant Act

Threshold for Home Owner Grant Phase-Out Increased to $1.6 Million

As announced on January 10, 2017, the threshold for the phase-out of the home owner grant has been increased to $1.6 million from $1.2 million for the 2017 tax year. For properties valued above the threshold, the grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold.

School Act

Provincial Residential Class School Property Tax Rates Set

The longstanding rate-setting policy is that average residential class school property taxes, before application of the home owner grant, increase by the previous year’s provincial inflation rate. This rate-setting policy has been in place since 2003 and will continue in 2017. The rates were set in the spring.

Provincial Non-Residential Class School Property Tax Rates Set

A single province-wide school tax rate is set for each of the non-residential property classes. Consistent with longstanding policy, the rates for 2017, except the rate for the industrial property classes, were set so that non-residential class school tax revenue increases by inflation plus tax on new construction. This rate-setting policy has been in place since 2005. The rates were set in the spring.

The major industry class tax rate and the light industry class tax rate were set at the same rate as the business class tax rate, consistent with the policy announced in Budget 2008.

Taxation (Rural Area) Act

Provincial Rural Area Property Tax Rates Set

A single rural area residential property tax rate applies province-wide. The longstanding rate-setting policy that average residential rural property taxes increase by the previous year’s provincial inflation rate has been continued in 2017.

Consistent with longstanding policy, non-residential rural area property tax rates will be set so that non-residential rural area tax revenue will increase by inflation plus tax on new construction. The rates were set in the spring.

Home Owner Grant Act and Income Tax Act

Information Sharing Improved

To improve administration and enforcement of the Income Tax Act and Home Owner Grant Act, these acts are amended to allow for information sharing between the two acts. The Income Tax Act is also amended to provide income tax administrators with increased access to assessment data.

Tax Measures 67

Budget 2017 Update – 2017/18 to 2019/20

have a rate equal to the federal benchmark of $10 per tonne of CO2 equivalent emissions in 2018, rising by $10 per year to $50 per tonne in 2022. The federal government has committed to imposing a carbon price in any province or territory that does not develop its own broad-based carbon pricing system.Because British Columbia has had a broad-based carbon tax since 2008 at a price that exceeds the federal benchmark, it is expected that the proposed federal carbon pricing system will not apply in British Columbia.

Increasing BC’s Carbon TaxBC’s carbon tax is currently set at $30 per tonne of CO2 equivalent emissions. Starting April 1, 2018, carbon tax rates will increase annually by $5 per tonne of CO2 equivalent emissions until rates are equal to $50 per tonne in 2021. With these increases, British Columbia will exceed the carbon pricing requirements set out in the Pan-Canadian Framework, ensuring our province remains a leader in carbon pricing.

Impact on Individuals

Raising the carbon tax rate by $5 per tonne will result in increases in carbon tax paid by British Columbians, although the amount will vary depending on family composition and household use of taxable fuels for heating, cooking and transportation. For a family of four with $50,000 annual income, the $5 per tonne increase could attract about an additional $50 a year in carbon tax.With the increase in the carbon tax, the government is also providing an additional $40 million to low and modest income British Columbians through enhancements

Climate Action and Carbon PricingIt is widely recognized that the world’s climate is changing and that human activities are a contributing factor. Pricing carbon is a central policy tool in addressing climate change. The World Bank, the International Monetary Fund, the Organisation for Economic Co-operation and Development, Canada’s Ecofiscal Commission, as well as most economists, have recognized carbon pricing as an effective, transparent, and efficient way to encourage emissions reductions at the lowest cost to consumers, businesses and government.

Transitioning to a low carbon economy presents British Columbia with tremendous opportunities to capitalize on our abundance of clean renewable electricity, to promote innovation and to benefit from clean growth.

A low carbon economy is a resilient economy that promotes job creation and economic growth while ensuring a clean and sustainable environment for our children and grandchildren.

Pan-Canadian Framework on Clean Growth and Climate ChangeIn December 2016, British Columbia joined the federal government and most other provinces and territories in agreeing to the Pan-Canadian Framework on Clean Growth and Climate Change.

The framework is a collective plan to grow the economy, reduce emissions and adapt to a changing climate. The four pillars of the framework are:• pricingcarbonpollution;• complementarymeasuresinareaswhere

pricing alone is insufficient;•measurestosupportcommunitiesin

adapting to and being more resilient to a changing climate; and

• actionstoaccelerateinnovation,supportnew technology and create jobs.

Under the framework, provinces and territories are required to impose a carbon price. Provinces and territories have the flexibility to design their own carbon price. Jurisdictions with a carbon tax are required to

Table 1 Carbon Tax Rates – 2018 to 2021

Effective Date

BC Carbon Tax Rate

($/tonne CO2e)

Pan-CanadianFramework *

($/tonne CO2e)

Prior to 2018 ................................ $30 $0April 1, 2018 ................................ $35 $10April 1, 2019 ................................ $40 $20April 1, 2020 ................................ $45 $30April 1, 2021 ................................ $50 $40* The Pan-Canadian Framework requires that rate changes come into effect within

the calendar year. Only the BC rates are scheduled to come into effect on April 1 of each year.

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Table 2 Revenue Neutral Carbon Tax Report 2015/16 and 2016/172015/16 1 2016/17 1

Carbon tax revenue 2 ..................................................................................................................................... 1,190 1,220

Reduction in provincial revenues due to designated measures 3

Personal tax measures:• Low income climate action tax credit of $115.50 per adult plus $34.50 per child effective July 1, 2011 ....... (192) (195) • Reduction of 5% in the first two personal income tax rates ........................................................................... (283) (309) • Northern and rural home owner benefit of up to $200 4 ................................................................................. (83) (84) • Home renovation tax credit for seniors and persons with disabilities 5 .......................................................... (1) (2) • Children's fitness credit and children's arts credit ......................................................................................... (8) (8) • Small business venture capital tax credit budget increased .......................................................................... (3) (5) • Training tax credit extended – individuals ..................................................................................................... (9) (4) Total personal tax measures ......................................................................................................................... (579) (607)

Business tax measures:• General corporate income tax rate reduced from 12% to 11% effective July 1, 2008,

to 10.5% effective January 1, 2010, to 10% effective January 1, 2011 and increasedto 11% effective April 1, 2013 ........................................................................................................................ (218) (232)

• Small business corporate income tax rate reduced from 4.5% to 3.5% effective July 1, 2008 and to 2.5% effective December 1, 2008 ............................................................................................................. (226) (230)

• Corporate income tax small business threshold increased from $400,000 to $500,000 ............................... (21) (21) • Industrial property tax credit of 60% of school property taxes payable by major industry ............................. (23) (23) • School property taxes reduced by 50% for land classified as "farm" ............................................................ (2) (2) • Interactive digital media tax credit ................................................................................................................. (33) (65) • Training tax credit extended – businesses .................................................................................................... (5) (8) • Scientific research and experimental development tax credit extended in 2014 ........................................... (131) (148) • Film Incentive BC tax credit extended in 2009 and enhanced in 2010 .......................................................... (106) (51) • Production services tax credit extended in 2009 and enhanced in 2010 ...................................................... (385) (340) Total business tax measures ........................................................................................................................ (1,150) (1,120) Total designated revenue measures ............................................................................................................. (1,729) (1,727)

1

2

3

4 Eligible homeowners are those in areas outside the Capital, Greater Vancouver and Fraser Valley Regional Districts.5 In Budget 2016 , this credit was expanded and renamed from the BC seniors' home renovation tax credit.

Designated measures are measures designated to return carbon tax to taxpayers. Designated measures for 2015/16 are set out in the Carbon Tax Plan presented with Budget 2015 and designated measures for 2016/17 are set out in the Carbon Tax Plan presented with Budget 2016.

($ millions)

Based on 2015/16 and 2016/17 Public Accounts.The carbon tax applies to fuels and combustibles at rates based on the carbon dioxide equivalent emissions of each particular fuel or combustible.

to the low income climate action tax credit. The maximum annual amount per adult will increase by $19.50 to $135 per adult from the current $115.50. The maximum annual amount per child will increase by $5.50 to $40 per child from the current $34.50. Single-parent families will continue to receive the adult amount for the first child in the family.These enhancements will help ensure that low and modest income families are not made worse off by the increase to the carbon tax.Future InitiativesThe following measures are also being considered for implementation as part of future budgets:• furthercarbontaxrelief,inadditiontothe

enhancements to the low income climate action tax credit;

• complementarycarbonpricingmeasuresto address emissions not currently covered by the carbon tax, in particular fugitive emissions and emissions from slash pile burning;

• developstrategieswithindustriestosupportthe transition of carbon intensive sectors to a lower carbon economy; and

• otherinvestmentsinclimatechangesolutions that create jobs, benefit communities and reduce climate pollution.

Revenue Neutral Carbon Tax Report and Plan

The requirement in Part 2 of the Carbon Tax Act to prepare an annual Carbon Tax Report and Plan is eliminated, effective for future budgets.

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Budget 2017 Update – 2017/18 to 2019/20

Table 3 Revenue Neutral Carbon Tax Plan 2017/18 to 2019/20Forecast

2017/18 2018/19 2019/20($ millions)

Carbon tax revenue 1 ............................................................................................................................. 1,228 1,462 1,697

Personal tax measures:• Low income climate action tax credit of $115.50 per adult plus $34.50 per child

effective July 1, 2011, and increased to $135 per adult plus $40 per child effective April 1, 2018 …… (195) (235) (235) • Reduction of 5% in the first two personal income tax rates ................................................................. (322) (345) (362) • Northern and rural home owner benefit of up to $200 2 ........................................................................ (85) (85) (86) • Home renovation tax credit for seniors and persons with disabilities ……............................................ (2) (2) (2) • Small business venture capital tax credit budget increased 3 .............................................................. (9) (9) (9) • Training tax credit extended – individuals 4 .......................................................................................... (15) (15) (15) • Medical Services Plan premiums reduced by 50% effective January 1, 2018 ..................................... (311) (1,245) (1,260) Total personal tax measures (939) (1,936) (1,969)

Business tax measures:• Small business corporate income tax rate reduced from 4.5% to 3.5% effective

July 1, 2008, and to 2.5% effective December 1, 2008 ........................................................................ (304) (327) (324) • Small business corporate income tax rate reduced from 2.5% to 2% effective

April 1, 2017 ......................................................................................................................................... (79) (81) (81) • Corporate income tax small business threshold increased from $400,000 to $500,000 ..................... (21) (21) (21) • Industrial property tax credit of 60% of school property taxes payable by major industry ................... (23) (23) (23) • School property taxes reduced by 50% for land classified as "farm" ................................................... (2) (2) (2) • Training tax credit extended – businesses 4 ......................................................................................... (10) (10) (10) • Scientific research and experimental development tax credit extended in 2014 and 2017 4 ................ (165) (175) (185) • Reduction of the provincial sales tax rate on electricity from 7% to 3.5% effective

on a date to be specified by regulation, and the elimination of provincial sales tax on electricityeffective April 1, 2019 5 ........................................................................................................................ (21) (82) (164)

Total business tax measures ............................................................................................................... (625) (721) (810)

Total revenue measures ........................................................................................................................ (1,564) (2,657) (2,779) 1

2

3 Forecasted amounts include the cost of the $3.5 million budget increase announced in Budget 2017 .4

5

Designated revenue measures:

The carbon tax applies to fuels and combustibles at rates based on the carbon dioxide equivalent emissions of each particular fuel or combustible.

The Plan assumes that the cost of tax measures with sunset dates continues beyond their expiry dates.

Eligible homeowners are those in areas outside the Capital, Greater Vancouver and Fraser Valley Regional Districts.

This is considered a business tax measure because electricity purchased for residential use is already exempt from provincial sales tax.

Tables 2 and 3 show the Carbon Tax Report 2015/16 and 2016/17 and the Carbon Tax Plan 2017/18 to 2019/20.

Table 2, Revenue Neutral Carbon Tax Report 2015/16 and 2016/17, reports the carbon tax revenues and the cost of the tax reductions for the 2015/16 and 2016/17 fiscal years. For the 2015/16 and 2016/17 fiscal years, this report is based on the 2015/16 and 2016/17 Public Accounts, respectively.

Table 3, Revenue Neutral Carbon Tax Plan 2017/18 to 2019/20, shows carbon tax revenue and tax reduction cost estimates for the revenue measures designated as those that return the carbon tax revenues to taxpayers for 2017/18 to 2019/20.

The three-year fiscal plan for Budget 2017 Update assumes the cost of tax measures with sunset dates continues, for purposes of the plan, beyond their expiry dates. The Revenue Neutral Carbon Tax Plan presented in Table 3 reflects this assumption.

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MSP Premiums Reduced by 50 per cent effective January 1, 2018

As a first step, MSP premiums will be reduced by 50 per cent effective January 1, 2018 for all British Columbians. This will mean that couples will save up to $900 per year and single adults and single parents will save up to $450 per year.

The previous government had indicated it would limit the 50 per cent reduction to individuals and families with incomes up to $120,000. However, this would have required that individuals and many employers apply for the reduction through a process similar to the premium assistance program, putting significant compliance costs on families, businesses and government. For example, employers that administer group plans would have had to determine the family income of each employee, requiring them to get permission from employees’ spouses in order to properly administer the program. Facing these complexities and knowing the program would be eliminated in a few years, many employers would likely stop administering group plans, forcing employees to apply for the 50 per cent reduction on their own.

The additional complexity and frustration of administering the $120,000 eligibility threshold to individuals, businesses and government would have been unreasonable and a significant number of families with incomes under $120,000 would not receive the reduction.

As such, the government has decided to apply the 50 per cent reduction for all British Columbians, ensuring no new application process is necessary. Premium assistance for low and modest income families (see Table 2.2 in Part 2: Tax Measures) will still be available through the existing application process.

Medical Services Plan Premiums

Medical Services Plan Premiums Eliminated in Four Years

Medical Services Plan (MSP) premiums are regressive, expensive and a significant administrative and compliance burden for families, businesses and government. In addition, the previous government increased premiums by over 100 per cent since 2001 (see chart below). For these reasons, the government is committed to eliminating MSP premiums within four years.

MSP Premium Elimination Task Force

To ensure MSP premium elimination is accomplished in the best way possible, the government will establish a task force of experts to provide advice and recommendations on how best to replace MSP premium revenue. The task force will be guided by terms of reference with a key focus on tax fairness and economic competitiveness. Recommendations will also ensure MSP premiums are eliminated within four years. The task force will be established in the fall of 2017 and report back to the government by spring of 2018.

$432

$900

$450

$0$0

$200

$400

$600

$800

$1,000

2001 2017 2018 Within 4 years

MSP premiums eliminated within 4 years (Single Individual)Annual

premiums

Budget 2017 Update – 2017/18 to 2019/20

Part 3: BRITISH COLUMBIA ECONOMIC REVIEW AND OUTLOOK 1

Summary

Following an estimated increase of 3.6 per cent in 2016, the Ministry of Finance (Ministry) forecasts British Columbia’s economy to grow by 2.9 per cent in 2017, 2.1 per cent in 2018, and 2.0 per cent annually from 2019 to 2021.

The Ministry’s forecast for BC real GDP growth is 0.1 percentage point below the outlook provided by the Economic Forecast Council for 2017 and 0.2 percentage points below for 2018 and beyond. This prudence acknowledges the downside risks to the economic forecast and is one of the levels of prudence built into the fiscal plan.

Downside risks to BC’s economic outlook include uncertainty regarding US fiscal and trade policy, the potential for a slowdown in domestic activity, as well as risks arising from the challenging economic environment in Asia and the euro zone. Additionally, there are risks related to monetary policy tightening and the uncertainties associated with commodity prices and the exchange rate outlook.

British Columbia Economic Activity and Outlook

The Ministry’s estimate for BC real GDP growth in 2016 and the outlook for 2017 are higher than what was projected in Budget 2017 as BC’s economy has performed better than expected. Stronger than anticipated consumer spending and export activity in the latter part of 2016 is primarily responsible for the upward revision to the Ministry’s real GDP estimate for 2016, from 3.0 per cent to 3.6 per cent growth. Meanwhile for 2017, year-to-date data for key indicators such as employment, retail sales, housing starts and exports have exceeded expectations. As such, the Ministry’s forecast for BC real GDP growth of 2.9 per cent in 2017 is higher than the 2.1 per cent projected in Budget 2017. The outlook for BC’s economy for 2018 and beyond is relatively unchanged from the previous outlook as the balance of risks to the domestic and global economy remains largely unchanged.

1 Reflects information available as of August 24, 2017, unless otherwise indicated.

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Ministry of Finance

Economic Forecast Council

BC real GDP(annual per cent change)

Chart 3.1 British Columbia’s economic outlook

72 British Columbia Economic Review and Outlook

Budget 2017 Update – 2017/18 to 2019/20

As mentioned above, a variety of economic indicators point to continued strength in BC’s economy in 2017 (see Table 3.1). While so far this year housing starts have been slightly lower than they were in 2016, they remain elevated. An average of six private sector forecasters2 estimate that BC experienced the strongest growth in real GDP among provinces last year (consistent with Statistics Canada’s preliminary real GDP by industry release in May 2017). The same private sector forecasters expect BC’s economic growth to rank near the top of the provincial rankings in 2017 and 2018.

The Labour Market

The pace of employment growth in BC has increased in recent years. Following an annual gain of just 3,100 jobs in 2013 (+0.1 per cent) and moderate increases in both 2014 and 2015, employment in BC increased by 73,300 jobs (+3.2 per cent) in 2016. That momentum has continued so far this year, with employment in the province advancing by 88,500 jobs (+3.7 per cent) in the first seven months of 2017 compared to the same period of last year. Most of the year-to-date job gains have been in full-time employment (about 74,500 jobs), with gains in part-time employment as well (about 14,100 jobs). Year-to-date employment growth was led by the finance, insurance, real estate, rental and leasing sector, as well as the construction industry, while there were job losses in some sectors including the forestry, fishing, mining, quarrying, oil and gas industry.

2,100

2,200

2,300

2,400

2,500

Source: Statistics Canada

BC employment (thousands, sa)

Mar 2009: 2,184

Jul 2017: 2,481

Jun 2008: 2,256

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Chart 3.2 BC employment

Table 3.1 British Columbia Economic Indicators

Jan. to Mar. 2017 Apr. to Jun. 2017change from change from

All data seasonally adjusted Oct. to Dec. 2016 Jan. to Mar. 2017Per cent change

Employment …………………………… +1.3 +1.5 +3.7Manufacturing shipments ……………… -0.6 +5.1 +8.6 *Exports …………………………………… -8.6 +5.0 +16.6 *Retail sales ……………………………… +2.8 +4.1 +8.8 *Housing starts …………………………… -8.3 +28.3 -5.4Non-residential building permits ……… +10.2 +17.8 +0.1 ** Data to June

Year-to-DateJan. to Jul. 2017

change fromJan. to Jul. 2016

2 A subset of the Economic Forecast Council that regularly forecasts economic performance in all provinces (BMO, RBC, CIBC, TD, Scotiabank, IHS Markit), as of August 24, 2017.

Budget 2017 Update – 2017/18 to 2019/20

British Columbia Economic Review and Outlook 73

The provincial unemployment rate averaged 5.4 per cent year-to-date to July 2017, down from an average of 6.1 per cent in the first seven months of 2016. BC’s labour force has increased 2.9 per cent year-to-date to July.

Outlook

The Ministry forecasts that employment in BC will increase by 3.1 per cent in 2017, or by approximately 74,700 jobs. In 2018, employment growth of 1.2 per cent is expected, followed by 1.1 per cent annual increases in the medium-term (2019 to 2021). The province’s unemployment rate is expected to average 5.6 per cent in 2017 and 5.8 per cent in 2018, before rising to around 5.9 per cent in the medium-term.

Consumer Spending and Housing

Consumer spending in BC has been rising at an elevated pace in the past few years, bolstered by historically low interest rates, housing activity, increased tourism, and solid economic fundamentals such as improving employment growth. Year-to-date to June, retail sales increased by 8.8 per cent, led by sales at building material and garden equipment and supplies dealers (+25.2 per cent), gasoline stations (+22.6 per cent) and motor vehicle and parts dealers (+11.2 per cent).

In 2016, BC housing starts reached their highest level in over two decades. Following a brief cooling period from October 2016 to February 2017, BC housing starts have returned to an elevated level. Year-to-date to July, BC housing starts have averaged 41,251 annualized units, a decrease of 5.4 per cent from the near-record levels of the first seven months of 2016. The value of residential building permits, a leading indicator of home construction, was 7.6 per cent higher in the first half of 2017 compared to the first half of the previous year.

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Source: Statistics Canada

BC retail sales ($ millions, sa)

Jun 2017: 7,156

Dec 2008: 4,379

Jun 2008: 4,957

Chart 3.3 BC retail sales


Budget 2017 Update – 2017/18 to 2019/20

BC home sales have generally mirrored the trends of housing starts. Housing market activity started 2016 at a rapid pace, however activity began to slow in the spring of 2016. Over the course of this year, home sales have rebounded (see Chart 3.5). The average home price in BC peaked at $750,829 in January 2016, fell below $700,000 by June 2016, and then returned above that threshold by April 2017. As of July 2017, the average home price in BC was $718,503.

Regionally, Greater Vancouver, the Fraser Valley and Victoria have experienced notable declines in unit sales year-to-date to July. As well, average home prices have decreased year-to-date in the Greater Vancouver, Fraser Valley and Northern Lights real estate board regions, while increasing in all other regions.

In recent years, the elevated pace of housing market activity has helped support the provincial economy. Going forward, rising interest rates are likely to weigh on housing

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12,000

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800,000

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Source: Canadian Real Estate Association / Haver Analytics

BC MLS average home price (dollars, sa)

BC MLS home sales (units, sa)

Sales July 2017: 8,503

Price July 2017: $718,503

Chart 3.5 BC housing market activity

0

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40,000

50,000

60,000

Source: Canada Mortgage and Housing Corporation *Historical average from Jan. 1990 to Dec. 2016

BC housing starts (annualized units, sa)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year-to-date to July 2017: 41,251

Historical Average*: 29,465

Chart 3.4 BC housing starts

Budget 2017 Update – 2017/18 to 2019/20


market activity, as are various housing-related policy measures, such as tighter mortgage rules. Since the implementation of the 15 per cent additional property transfer tax in August 2016, the average rate of foreign investment in Metro Vancouver residential real estate has decreased compared to the rates observed before the implementation of the tax.

In terms of non-residential construction activity, the value of non-residential building permits was nearly unchanged (+0.1 per cent) year-to-date to June, with gains in industrial as well as institutional and governmental permits offsetting a decline in commercial permits. Over the past decade, the value of non-residential permits has fluctuated between $3.0 billion and $4.0 billion annually.

Outlook

The Ministry forecasts real household consumption of goods and services to increase by 3.7 per cent in 2017, 2.7 per cent in 2018, and 2.6 per cent on average over the medium-term. Last year, real household consumption grew by an estimated 4.3 per cent.

Following 7.4 per cent growth in 2016, the Ministry expects nominal retail sales to rise 5.9 per cent in 2017, 4.0 per cent in 2018 and 3.6 per cent annually over the medium-term.

The Ministry forecasts housing starts to total 38,300 units in 2017, as housing starts have generally been strong in the first seven months of the year. Housing starts are then forecast to moderate to around 30,300 units in 2018 and to average 27,000 units in the medium-term.

Business and Government

Real business investment is estimated to have increased by 6.9 per cent in 2016, which represents the largest percentage rise since 2006. The increase was primarily driven by the growth in residential investment. Real business investment in both machinery and equipment and non-residential structures is estimated to have increased modestly last year, while real business investment in intellectual property is estimated to have declined in 2016, as it did in the previous two years.

Real expenditures on goods and services by all levels of government are estimated to have increased by 4.2 per cent in 2016, following 2.8 per cent growth in 2015.

Outlook

Looking ahead, real business investment is projected to rise by 4.0 per cent in 2017, with gains in residential, non-residential, and machinery and equipment investment expected to outweigh a decline in intellectual property investment. Thereafter, real business investment is anticipated to grow by 4.4 per cent in 2018 and by around 3.6 per cent annually in the medium-term.

Real expenditures on goods and services by all levels of government are forecast to increase by 2.4 per cent in 2017, 0.1 per cent in 2018 and average about 0.2 per cent annually over the medium-term.

The Ministry expects the net operating surplus of corporations, an approximation of corporate profits, to increase by 9.1 per cent in 2017, by 2.8 per cent in 2018, and by around 2.9 per cent annually in the medium-term.


Budget 2017 Update – 2017/18 to 2019/20

External Trade and Commodity Markets

The recent performance of BC’s international merchandise exports has been mixed, as the performance of energy and non-energy exports have diverged. In the first half of 2017, energy exports increased sharply from their depressed levels in the first half of 2016, while non-energy exports declined. In particular, exports of motor vehicles and parts declined 53.2 per cent and farm, fishing and intermediate food product exports declined 10.2 per cent year-to-date. Though the value of softwood lumber exports has increased 1.6 per cent due to higher prices, in terms of quantity, softwood lumber exports have decreased 12.0 per cent. Altogether, the value of BC’s merchandise exports has increased 16.6 per cent in the first half of 2017 compared to the first half of the previous year, with exports to the US up 10.5 per cent and exports to other international destinations up 24.0 per cent on a year-to-date basis. Meanwhile, shipments of BC’s manufactured goods have increased 8.6 per cent compared to the same period of last year, with notable year-to-date increases in shipments of primary metal and wood products.

In terms of commodity prices, the Western spruce-pine-fir (SPF) 2x4 lumber price averaged $383 US/000 board feet year-to-date to July, an increase of 28.3 per cent compared to the same period of 2016. In recent months, the price of SPF lumber has been around $400 US/000 board feet. The price of pulp averaged $855 US per tonne year-to-date to July, an increase of 7.1 per cent over the same period of the previous year. In recent months, the price of pulp has been about $890 US per tonne.

Energy prices have generally improved from the low levels observed in early 2016. The West Texas Intermediate (WTI) crude oil price averaged $49.52 US/barrel year-to-date to July, an increase from the $40.06 US/barrel average in the same period last year. Meanwhile, the Plant Inlet price of natural gas averaged $1.43 C/GJ year-to-date to July, up from an average of just $0.69 C/GJ during the same period last year. However, in recent months the price of natural gas and WTI crude oil have both weakened somewhat.

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Source: BC Stats

BC international merchandise exports ($ millions, sa)

Jun 2017: 3,479

Oct 2008: 3,050

May 2009: 1,916

Chart 3.6 BC exports

Budget 2017 Update – 2017/18 to 2019/20


Most metal and mineral prices have risen significantly above the lows observed early in 2016. Year-to-date to July 2017, the price of copper, molybdenum, lead, and zinc all recorded double-digit percentage increases compared to the same period of 2016. By contrast, the price of silver increased more modestly (+4.3 per cent) and the price of gold was nearly unchanged (-0.1 per cent).

Outlook

Real exports of goods and services are forecast to rise by 1.5 per cent in 2017, following an estimated increase of 2.2 per cent in 2016. Growth of 1.3 per cent is expected in 2018, followed by growth of around 1.7 per cent annually over the medium-term. The uncertainty surrounding US trade policy, the potential for a slowdown in external demand, and exchange rate uncertainty could have a material negative impact on BC’s exports.

The price of lumber is projected to average $377 US/000 board feet in 2017 and $360 US/000 board feet in 2018, before moderating to around $333 US/000 board feet over the medium-term. The price of natural gas is expected to average $1.60 C/GJ in 2017/18, $1.68 C/GJ in 2018/19, and $1.78 C/GJ in 2019/20. As commodity prices can be volatile, the outlook is subject to considerable uncertainty.

Demographics

BC’s population on April 1, 2017 was 1.3 per cent higher than on the same date in 2016. Over these twelve months, BC’s population rose by 59,544 people, comprising net migration of 52,294 people and natural population growth of 7,250 people. Nearly two-thirds of net migrants arrived from other countries and over a third were from other provinces.

Outlook

The forecast calls for BC’s July 1st population to increase by 1.2 per cent in both 2017 and 2018, followed by average annual growth of about 1.1 per cent over the medium-term.

Total net migration of about 47,800 persons is expected in 2017, with roughly two-thirds from international sources and one-third from other provinces. Net migration is then projected to be around 47,700 persons in 2018 and between 47,400 and 49,400 persons annually over the medium-term.

Inflation

Consumer price inflation in BC was 1.9 per cent in July 2017, having ranged between 1.7 per cent and 2.3 per cent in the first seven months of 2017. Year-to-date to July 2017, consumer prices in BC are up 2.0 per cent compared to the same period last year. Consumer prices have increased in most categories with significant strength in transportation and recreation, reading and education prices. Meanwhile, food price inflation has been muted compared to inflation in other categories. Gasoline prices have fallen in the three most recent months, after increasing in three of the first four months of the year. BC’s rate of inflation has exceeded Canada’s in every month so far this year.


Budget 2017 Update – 2017/18 to 2019/20

Outlook

Consumer price inflation in BC is forecast to be 2.1 per cent in both 2017 and 2018, then 2.0 per cent annually in the medium-term. Canada’s rate of inflation is assumed to be 1.7 per cent in 2017, given the relatively soft inflation readings in the first seven months of the year. The rate of inflation in Canada is expected to be 1.9 per cent in 2018 and then 2.0 per cent annually over the medium-term (the Bank of Canada’s inflation target).

Risks to the Economic Outlook

Risks to the BC economic outlook continue to be weighted to the downside. The main risks to the outlook include the following:• uncertaintyregardingUSfiscalandtradepolicy;• potentialforaslowdownindomesticandCanadianeconomicactivity;• falteringofEurope’seconomicrecoveryasitfacesthechallengesoftheUKexitingthe

European Union and elevated sovereign debt;• slowereconomicactivityinAsia,particularlyasChinatransitionstoaconsumer-

driven economy, resulting in weaker demand for BC’s exports;• potentialformonetarypolicytighteningtodampeneconomicmomentum;and• exchangerateandcommoditypriceuncertainty.

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-1

0

1

2

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4

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Source: Statistics Canada

BC Consumer Price Index (y/y per cent change)

July 2009: -1.6%

July 2008: 3.3%

July 2017: 1.9%

Chart 3.7 BC inflation

Budget 2017 Update – 2017/18 to 2019/20


External Outlook

United States

Eight years have passed since the last US recession and the US economic expansion is now the third-longest on record. Following lackluster growth in 2016 – the weakest annual growth since the recession – the US economy expanded slowly to start 2017, before accelerating in the April to June quarter. Overall, US real GDP grew by 2.0 per cent in the first half of 2017 compared to the first half of the previous year. Robust consumer spending and non-residential investment were partly offset by weakness in residential investment, net exports, and government spending. Over the past six quarters, government spending, which makes up about a sixth of US real GDP, has seen virtually no growth.

The US labour market has improved in most respects so far in 2017. US employment has increased 1.6 per cent year-to-date to July. An average of about 184,000 jobs per month were created in the first seven months of 2017, close to the roughly 187,000 jobs per month created on average in 2016 overall. The unemployment rate of 4.3 per cent in May 2017, matched in July 2017, was the lowest in sixteen years. However, the labour force participation rate was 62.9 per cent in July 2017. While little changed from the previous three years, the participation rate is down substantially from before the recession. So far in 2017, wage growth has remained sluggish, only modestly outpacing inflation.

US housing construction has continued to increase so far this year but with less upward momentum than was evident in the previous few years (see Chart 3.9). US housing starts have averaged 1.19 million annualized units in the first seven months of 2017, up from 1.17 million annualized units in the same period last year. On a quarterly basis, housing starts have contracted in three of the four most recent quarters. The residential investment component of real GDP, which includes smaller projects such as renovations in addition to homebuilding, has contracted in three of the last five quarters, which has weighed on economic growth recently. Furthermore, the pace of growth of new and existing home sales has slowed in the past twelve months.

Chart 3.8 US economic growth

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US real GDP (annualized q/q per cent change)

Source: US Bureau of Economic Analysis * Advance estimate, subject to revision

*


Budget 2017 Update – 2017/18 to 2019/20

The growth of US retail sales has been uneven in 2017. Despite several disappointing months, year-to-date retail sales have increased 4.5 per cent compared to the first seven months of last year. Sales at non-store retailers (e.g. online stores) have shown particular strength so far this year, as they have for the past few years. Sales at gasoline stations have fallen over the past six months, as gasoline prices have trended downward over that time. According to Conference Board data, US consumer confidence surged late in 2016, surpassing the pre-recession high. Despite decreasing somewhat since March 2017, consumer confidence in the US remains high.

Chart 3.9 US housing starts

0

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Source: US Census Bureau

US housing starts (thousands of annualized units, sa)

Jan 2006: 2,273

Jul 2017: 1,155

Apr 2009: 478

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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Jan Feb Mar Apr May Jun Jul Aug

Forecast annual per centchange in US real GDP, 2017

Source: Consensus EconomicsThe chart above represents forecasts for real GDP growth in 2017 as polled on specific dates. For example, forecasters surveyed on January 9, 2017 had an average 2017 US growth forecast of 2.3 per cent, while on August 7, 2017 they forecast 2017 US growth at 2.1 per cent.

2017

Chart 3.10 Consensus outlook for the US in 2017

Budget 2017 Update – 2017/18 to 2019/20


Outlook

Consensus Economics (Consensus) forecasters have downgraded their projections for US economic growth in 2017. The August 2017 Consensus survey forecasts 2.1 per cent US real GDP growth in 2017, below the 2.3 per cent forecast in the January Consensus. For 2018, the August Consensus forecasts growth to pick up to 2.4 per cent. Risks to the US outlook include those relating to monetary policy tightening and uncertainty surrounding the direction of fiscal and trade policy.

In recognition of uncertainty regarding the US outlook, the Ministry’s assumptions for US growth are lower than the August 2017 Consensus. The Ministry assumes that US real GDP will expand by 2.0 per cent in 2017, 2.1 per cent in 2018 and 2.0 per cent in each of the remaining years of the forecast horizon.

Canada

The Canadian economy has strengthened following the setback of a 1.4 per cent annualized contraction in the April to June quarter of 2016. Canadian real GDP expanded by an annualized 3.7 per cent in the January to March quarter of 2017. By industry, economic growth has been led by expanded production in the mining, quarrying, oil and gas sector, which has benefited from the improvement in energy prices compared to early 2016. Another bright spot was residential investment, which was 4.2 per cent higher in the January to March quarter of 2017 than in the same quarter in the previous year. However, business investment overall has remained sluggish over that span (-0.1 per cent), following annual declines in 2015 and 2016. Household consumption advanced 3.1 per cent year-over-year in the January to March quarter of 2017.

Table 3.2 US Real GDP Forecast: Consensus versus Ministry of Finance 2017 2018

Per cent change in real GDPMinistry of Finance …………………………...……………… 2.0 2.1Consensus Economics (August 2017) ……………………… 2.1 2.4

Chart 3.11 Canadian economic growth

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Canadian real GDP (annualized q/q per cent change)

Source: Statistics Canada


Budget 2017 Update – 2017/18 to 2019/20

Alongside faster economic growth, Canadian employment growth has improved from an annual pace of 0.7 per cent in 2016 to growth of 1.7 per cent year-to-date to July 2017. Notably, Canadian employment increased more in the twelve months since July 2016 than it did in the previous 38 months combined. On a year-to-date basis, job gains were concentrated in the services-producing sector (+301,100 jobs), while employment in the goods-producing sector grew more slowly (+9,200 jobs). The national unemployment rate declined from 7.2 per cent at the beginning of 2016 to 6.3 per cent in July 2017. In the first seven months of 2017, the national unemployment rate has averaged 6.6 per cent.

Other indicators have predominantly shown increased Canadian economic activity. Canadian merchandise exports increased 12.7 per cent year-to-date to June, with gains concentrated in the export of energy products, while non-energy exports have increased more slowly. Canadian manufacturing shipments have increased 6.5 per cent in the first half of 2017 compared to the first half of last year, with growth led by petroleum and coal product manufacturing. Canadian retail sales rose 6.8 per cent in the first half of 2017 compared to the first half of the previous year. Meanwhile, Canadian household debt has increased to 169 per cent of disposable income in the January to March quarter, up from 166 per cent of disposable income in the same quarter of last year.

The Canadian housing market has cooled somewhat. The average Canadian home price was $507,464 year-to-date to July, an increase of 3.6 per cent compared to the same period last year, while unit sales declined 3.7 per cent. After Ontario’s introduction of targeted policy measures in April 2017, the Ontario housing market has cooled, particularly in Toronto. Canadian housing starts increased 9.0 per cent year-to-date to July, to average 216,189 units.

Outlook

With the improvement in many economic indicators so far in 2017, the Canadian economy is on track for its fastest annual growth since 2011. The August Consensus anticipates Canadian real GDP growth of 2.9 per cent in 2017 and 2.0 per cent in 2018.

Chart 3.12 Consensus outlook for Canada in 2017

2.0 2.0 2.12.3 2.4 2.5

2.72.9

0.0

1.0

2.0

3.0

Jan Feb Mar Apr May Jun Jul Aug

Forecast annual per centchange in Canadian real GDP, 2017

Source: Consensus EconomicsThe chart above represents forecasts for real GDP growth in 2017 as polled on specific dates. For example, forecasters surveyed on January 9, 2017 had an average 2017 Canadian growth forecast of 2.0 per cent, while on August 7, 2017 they forecast 2017 Canadian growth at 2.9 per cent.

2017

Budget 2017 Update – 2017/18 to 2019/20


There is considerable uncertainty around US-Canada trade policy, with the renegotiation of the North American Free Trade Agreement and volatility related to the softwood lumber dispute. The expectation for higher interest rates further cloud the outlook. Consequently, the Ministry assumes that the Canadian economy will expand by 2.7 per cent in 2017 and by 1.8 per cent in 2018 – somewhat less than the Consensus forecast in both years – followed by 1.9 per cent annual growth over the medium-term.

Asia

China’s economy grew by 6.9 per cent in the first half of 2017 year-over-year, a slight pick-up from the 6.7 per cent annual pace observed in 2016. However, China’s economy currently faces a number of challenges. While China’s export growth has slowed in recent years and domestic activity has taken a more central role in driving economic growth (consistent with China’s official national plans), there are concerns about the extent to which the economy is relying on credit growth. In May 2017, Moody’s Investors Service downgraded China’s credit rating for the first time in nearly thirty years, citing rising indebtedness and the prospect for slower economic growth. Meanwhile, government measures aimed at cooling the overheated property market have been introduced, with preliminary indications that the measures are having an impact.

In Japan, annualized economic growth was modest, ranging between 1.3 per cent and 1.7 per cent for four consecutive quarters, before accelerating to 4.0 per cent in the April to June quarter of 2017 supported by consumer spending. Despite fiscal stimulus measures and the highly accommodative monetary policy of the Bank of Japan, consumer price inflation in Japan remains subdued. Increasingly, labour shortages are a challenge in Japan given the country’s unfavourable demographic trends (as Japan’s population has declined by over 1 million people since 2010 and Japan’s immigration policy is restrictive).

Outlook

The government of China is targeting real GDP growth of around 6.5 per cent this year. The August 2017 Consensus forecasts China’s real GDP to grow by 6.7 per cent in 2017 and 6.3 per cent in 2018. In recognition of the challenges facing the Chinese economy, the Ministry assumes that China’s real GDP will expand by 6.5 per cent in 2017 and 6.1 per cent in 2018.

The August Consensus forecasts that Japan’s economy will expand by 1.4 per cent in 2017 and by 1.1 per cent in 2018. The Ministry prudently assumes Japan’s real GDP will increase by 1.1 per cent in 2017 and 0.9 per cent in 2018. Potential economic growth in Japan is being held back by structural factors such as demographics.

Table 3.3 Canadian Real GDP Forecast: Consensus versus Ministry of Finance 2017 2018

Per cent change in real GDPMinistry of Finance …………………………...……………… 2.7 1.8Consensus Economics (August 2017)……………………… 2.9 2.0


Budget 2017 Update – 2017/18 to 2019/20

Europe

The euro zone economy grew at an annualized rate of 2.5 per cent in the April to June quarter of 2017, the third consecutive quarter of solid growth. Alongside this economic growth, unemployment rates have declined year-over-year in all euro zone countries except Estonia. Unemployment rates nevertheless remained high in several euro zone countries in April, including Italy (11.1 per cent), Spain (17.6 per cent) and Greece (21.7 per cent). The European Commission’s economic sentiment index of consumer and business confidence in the euro zone rose in July to its highest level in a decade.

Inflation has diminished in the euro area to 1.3 per cent in July, after starting the year at the European Central Bank (ECB) target of “below, but close to, 2.0 per cent”. The ECB continues to provide substantial monetary policy accommodation in the form of very low policy interest rates and large monthly asset purchases, though further economic momentum may lead the ECB to begin phasing out its asset purchases in 2018.

In the UK, uncertainty is expected to take a toll on investment as the country prepares to exit the European Union. Annualized real GDP growth in the UK was 0.9 per cent in the January to March quarter of 2017 and 1.2 per cent in the April to June quarter – below the growth trend of the previous few years.

Outlook

The August Consensus forecasts the euro zone economy to expand by 2.0 per cent in 2017 and 1.8 per cent in 2018. The region’s economy faces risks from the UK’s exit from the European Union and from elevated sovereign debt in some euro zone countries. As such, the Ministry assumes that the euro zone’s economy will expand by 1.8 per cent in 2017 and 1.4 per cent in 2018.

Financial Markets

Interest rates

On July 12, 2017, the Bank of Canada raised its target for the overnight interest rate to 0.75 per cent. Back in January 2015 and July 2015, the Bank of Canada had lowered the target rate from 1.00 per cent to 0.50 per cent to help the Canadian economy adjust to lower oil prices. By July 2017, the Bank said that it believed that much of this adjustment was complete. As a result of the Bank’s July 2017 announcement, consumers have started to see higher interest rates. For example, in July 2017 the benchmark posted rate on a 5-year fixed mortgage from the chartered banks was the highest it has been since March 2014.

The US Federal Reserve has increased the federal funds target rate four times since December 2015, including three times in the past nine months (most recently in June 2017), and the federal funds rate is now set in the 1.00 to 1.25 per cent range. In July 2017, the Federal Reserve said that it intends to start reducing the amount of assets it holds relatively soon (provided events unfold as anticipated), a move that could raise US interest rates such as long-term bond rates and mortgage rates.

Budget 2017 Update – 2017/18 to 2019/20


Outlook

The Bank of Canada and the US Federal Reserve are expected to continue tightening monetary policy. Based on the average of six private sector forecasts as of July 21, 2017, the Ministry anticipates that the Bank of Canada will return the target rate to 1.0 per cent before the end of 2017, with the rate expected to average 1.2 per cent in 2018.

The same six private sector forecasters expect on average that the federal funds rate will be raised once more in 2017 and then raised gradually to an average of 1.7 per cent in 2018.

The interest rate on Canadian three-month Treasury bills is expected to average 0.7 per cent in 2017 and 1.2 per cent in 2018, according to the same six private sector forecasters. Meanwhile, ten-year Government of Canada bond rates are forecast to average 1.8 per cent in 2017 and 2.3 per cent in 2018.

0

1

2

3

4

5 Per cent

Sources: Bank of Canada, US Federal Reserve and BC Ministry of Finance forecasts.

Bank of CanadaOvernight Target Rate

US Federal Funds Target Rate

Forecast

3.25%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

3.00%

2018 2019 2020 2021

Chart 3.13 Interest rate forecasts

Table 3.4 Private Sector Canadian Interest Rate Forecasts

Average annual interest rate (per cent) 2017 2018 2017 2018

IHS Markit ………………………………… 0.7 1.5 1.8 2.7CIBC ……………………………………… 0.7 1.1 1.7 2.1BMO ……………………………………… 0.7 1.2 1.8 2.2Scotiabank ……………………………… 0.7 1.3 1.7 2.3TD ………………………………………… 0.6 1.0 1.7 2.4RBC ……………………………………… 0.7 1.2 1.7 2.5Average (as of July 21, 2017) ………… 0.7 1.2 1.8 2.3

3-month Treasury Bill 10-year Government Bond


Budget 2017 Update – 2017/18 to 2019/20

Exchange rate

The value of the Canadian dollar has generally strengthened since the beginning of May 2017, supported by positive economic data and the expectation that the Bank of Canada was increasingly likely to raise interest rates over the near-term. Although the loonie tends to be affected by the price of crude oil, the Canadian dollar has appreciated while the price of crude oil has decreased somewhat in recent months. Overall, the Canadian dollar averaged 75.5 US cents during the first seven months of 2017, similar to the 75.4 US cents observed in the same period last year, and was 79.8 US cents on August 24, 2017.

Outlook

Based on the average of six private sector forecasts as of July 21, 2017, the Ministry assumes that the Canadian dollar will average 76.3 US cents in 2017 and 77.3 US cents in 2018.

Chart 3.14 Private sector expectations for the Canadian dollar

60

70

80

90

100

110US cents/Canadian $

Sources: Bank of Canada and BC Ministry of Finance forecasts* Based on the average of private sector forecasts. Budget 2017 Update as of July 21, 2017 and Budget 2017 as of January 3, 2017.

81.8¢

Budget 2017 Update*

Budget 2017*

Forecast

80.5¢

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Table 3.5 Private Sector Exchange Rate ForecastsAverage annual exchange rate (US cents/Can $) 2017 2018

IHS Markit ……………………………………………………… 76.2 76.9CIBC ……………………………………………………………… 76.2 76.1BMO ……………………………………………………………. 76.3 77.7Scotiabank …………………………………………….………… 76.1 79.0TD ……………………………………………………………… 76.3 78.8RBC ……………………………………………………………… 76.4 75.6Average (as of July 21, 2017) ……………………………… 76.3 77.3

Budget 2017 Update – 2017/18 to 2019/20


Table 3.6.1 Gross Domestic Product (GDP): British Columbia

2015 2016 e 2017 2018 2019 2020 2021

Gross Domestic Product at Market Prices:– Real (chained 2007 $ billions) ………… 231.3 239.5 246.5 251.7 256.8 262.0 267.2

(% change) ……………………………… 3.3 3.6 2.9 2.1 2.0 2.0 2.0– Nominal (current prices, $ billions) ……… 250.0 262.9 276.2 287.6 299.1 310.8 323.0

(% change) ……………………………… 3.8 5.1 5.1 4.1 4.0 3.9 3.9

– GDP price deflator (2007 = 100) ………… 108.1 109.8 112.0 114.3 116.5 118.6 120.9 (% change) ……………………………… 0.5 1.5 2.1 2.0 1.9 1.9 1.9

Real GDP per person (chained 2007 $) ……… 49,286 50,407 51,295 51,759 52,202 52,662 53,108 (% change) ……………………………… 2.3 2.3 1.8 0.9 0.9 0.9 0.8

Real GDP per employed person (% change) ……………………………… 2.1 0.4 -0.2 0.9 0.9 0.9 0.9

Unit labour cost1 (% change) ………………… 0.6 0.7 1.7 2.0 2.0 1.9 1.9

Components of Real GDP at Market Prices (chained 2007 $ billions)Household expenditure on goods and services ………………………… 145.2 151.4 157.0 161.3 165.5 169.8 174.3 (% change) ……………………………… 3.1 4.3 3.7 2.7 2.6 2.6 2.6 – Goods …………………………………… 58.9 62.3 65.1 66.7 68.1 69.6 71.1 (% change) ……………………………… 3.8 5.7 4.6 2.4 2.1 2.1 2.1 – Services ………..………………………… 86.2 89.1 91.9 94.6 97.3 100.1 103.1 (% change) ……………………………… 2.7 3.3 3.1 3.0 2.9 2.9 2.9

NPISH2 expenditure on goods and services ……..………………… 3.4 3.5 3.5 3.5 3.6 3.6 3.6 (% change) ……………………………… 1.7 1.2 0.9 1.2 0.7 0.6 0.6Government expenditure on goods and services ……..………………… 39.9 41.5 42.5 42.5 42.8 42.8 42.9 (% change) ……………………………… 2.8 4.2 2.4 0.1 0.5 0.1 0.2Investment in fixed capital …………...………… 52.7 56.0 59.2 61.0 62.9 64.4 66.3 (% change) ……………………………… -0.3 6.2 5.7 3.0 3.3 2.3 2.9

Final domestic demand …………………..… 241.0 252.1 262.0 268.1 274.5 280.3 286.6 (% change) ……………………………… 2.3 4.6 3.9 2.3 2.4 2.1 2.3

Exports of goods and services ………………… 93.4 95.5 96.9 98.1 99.5 101.4 103.2 (% change) ……………………………… 2.8 2.2 1.5 1.3 1.4 1.8 1.8Imports of goods and services ………………… 102.6 106.9 111.2 113.7 116.3 119.0 121.8 (% change) ……………………………… 0.3 4.2 4.0 2.3 2.3 2.3 2.3Inventory change ……………...……………… 0.8 0.1 0.1 0.4 0.3 0.5 0.3Statistical discrepancy ………………………… -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1

Real GDP at market prices ………...………… 231.3 239.5 246.5 251.7 256.8 262.0 267.2 (% change) ……………………………… 3.3 3.6 2.9 2.1 2.0 2.0 2.01 Unit labour cost is the nominal cost of labour incurred to produce one unit of real output.2 Non-profit institutions serving households.e Ministry of Finance estimate.

Forecast

B.C. Ministry of Finance


Budget 2017 Update – 2017/18 to 2019/20

Table 3.6.3 Labour Market Indicators: British Columbia

2015 2016 2017 2018 2019 2020 2021Population (thousands at July 1) ……………… 4,693 4,752 4,806 4,863 4,919 4,975 5,032 (% change) ………………………………… 1.0 1.2 1.2 1.2 1.2 1.1 1.1

Net migration (thousands)

– International1,4 …………………………… 12.1 32.9 32.1 32.5 33.0 34.1 36.6

– Interprovincial4 …………………………… 21.5 20.0 15.7 15.2 14.4 13.6 12.8

– Total ……………………………………… 33.6 52.9 47.8 47.7 47.4 47.7 49.4

Labour force population2 (thousands) ……… 3,877 3,931 3,978 4,026 4,074 4,122 4,170 (% change) ………………………………… 1.2 1.4 1.2 1.2 1.2 1.2 1.2

Labour force (thousands) ……………………… 2,458 2,532 2,601 2,635 2,668 2,701 2,731 (% change) ………………………………… 1.3 3.0 2.7 1.3 1.2 1.2 1.1

Participation rate3 (%) ………………………… 63.4 64.4 65.4 65.4 65.5 65.5 65.5

Employment (thousands) ……………………… 2,306 2,380 2,454 2,483 2,511 2,540 2,567 (% change) ………………………………… 1.2 3.2 3.1 1.2 1.1 1.1 1.1

Unemployment rate (%) ……………………… 6.2 6.0 5.6 5.8 5.9 6.0 6.01 International migration includes net non-permanent residents and returning emigrants less net temporary residents abroad.2 The civilian, non-institutionalized population 15 years of age and over.3 Percentage of the labour force population in the labour force.4 Components may not sum to total due to rounding.

Forecast

Table 3.6.2 Selected Nominal Income and Other Indicators: British Columbia

2015 2016 2017 2018 2019 2020 2021

Compensation of employees1 ($ millions) … 123,130 128,408 e 134,448 140,036 145,689 151,444 157,424 (% change) ……………………………… 3.9 4.3 4.7 4.2 4.0 3.9 3.9

Household income ($ millions) ……………… 221,137 229,631 e 239,146 248,795 258,438 268,149 278,254 (% change) ……………………………… 5.3 3.8 4.1 4.0 3.9 3.8 3.8

Net operating surplus ($ millions) …………… 26,222 29,172 e 31,822 32,703 33,608 34,535 35,590 (% change) ……………………………… -0.5 11.2 9.1 2.8 2.8 2.8 3.1

Retail sales ($ millions) ……………………… 71,614 76,885 81,454 84,752 87,829 91,032 94,340 (% change) ……………………………… 6.9 7.4 5.9 4.0 3.6 3.6 3.6

Housing starts (units) ………………………… 31,446 41,843 38,300 30,328 27,021 27,039 26,982 (% change) ……………………………… 10.9 33.1 -8.5 -20.8 -10.9 0.1 -0.2

Consumer price index (2002 = 100) ………… 120.2 122.4 124.9 127.6 130.2 132.9 135.5 (% change) ……………………………… 1.1 1.8 2.1 2.1 2.0 2.0 2.01 Domestic basis; wages, salaries and employers' social contributions.e Ministry of Finance estimate.

Forecast


Budget 2017 Update – 2017/18 to 2019/20


Table 3.6.4 Major Economic Assumptions

2015 2016 2017 2018 2019 2020 2021

Real GDP Canada (chained 2007 $ billions) ……… 1,770 1,796 1,845 1,878 1,914 1,950 1,987 (% change) ……………………………… 0.9 1.5 2.7 1.8 1.9 1.9 1.9 US (chained 2009 US$ billions) ………… 16,472 16,716 17,050 17,409 17,757 18,112 18,474 (% change) ……………………………… 2.9 1.5 2.0 2.1 2.0 2.0 2.0 Japan (chained 2011 Yen trillions) ……… 516 521 527 532 536 541 546 (% change) ……………………………… 1.1 1.0 1.1 0.9 0.9 0.9 0.9 China (constant 2010 US$ billions) ……… 8,908 9,505 10,123 10,740 11,374 12,045 12,756 (% change) ……………………………… 6.9 6.7 6.5 6.1 5.9 5.9 5.9 Euro zone1 (% change) …………………… 1.9 1.7 1.8 1.4 1.3 1.3 1.3

Industrial production index US (2012 = 100) …………………………… 104.4 103.1 104.7 106.5 108.8 111.1 113.4 (% change) ……………………………… -0.7 -1.2 1.5 1.8 2.1 2.1 2.1 Japan (2010 = 100) ……………………… 97.4 97.1 100.2 101.2 102.1 103.1 104.0 (% change) ……………………………… -1.4 -0.3 3.2 1.0 0.9 0.9 0.9 China (% change) ………………………… 6.1 6.0 6.0 5.2 5.0 5.0 5.0 Euro zone1 (2010 = 100) ………………… 103.4 104.8 106.6 108.2 109.7 111.3 112.8 (% change) ……………………………… 2.1 1.4 1.7 1.5 1.4 1.4 1.4

Housing starts2 (thousands) Canada …………………………………… 196 198 195 175 180 180 180 (% change) ……………………………… 3.3 1.2 -1.5 -10.3 2.9 0.0 0.0 US …………………………………………… 1,112 1,174 1,195 1,200 1,200 1,200 1,200 (% change) ……………………………… 10.8 5.6 1.8 0.4 0.0 0.0 0.0 Japan ……………………………………… 909 967 930 880 880 880 880 (% change) ……………………………… 1.9 6.4 -3.8 -5.4 0.0 0.0 0.0

Consumer price index Canada (2002 = 100) …………………… 126.6 128.4 130.6 133.1 135.7 138.4 141.2 (% change) ……………………………… 1.1 1.4 1.7 1.9 2.0 2.0 2.0

Canadian interest rates (%) 3-month treasury bills …………………… 0.5 0.5 0.7 1.2 1.6 2.0 2.6 10-year government bonds ……………… 1.5 1.3 1.8 2.3 2.9 3.3 3.9

United States interest rates (%) 3-month treasury bills …………………… 0.1 0.3 0.9 1.6 2.1 2.5 3.0 10-year government bonds ……………… 2.1 1.8 2.4 2.9 3.4 3.8 4.2

Exchange rate (US cents / Canadian $) … 78.2 75.4 76.3 77.3 78.8 79.9 80.5

British Columbia goods and services Export price deflator (% change) ………… -0.2 3.4 e 3.8 2.9 2.8 2.7 2.71 Euro zone (19) is Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain.2 British Columbia housing starts appear in Table 3.6.2.e Ministry of Finance estimate.

Forecast



Budget 2017 Update – 2017/18 to 2019/20

forecast BC’s economy to grow by 3.0 per cent in 2017 and by 2.3 per cent in 2018, followed by average growth of 2.2 per cent annually from 2019 to 2021. This represents upward revisions to each forecast year compared to the Council’s January 2017 projections (see Chart 1).

Council members, on average, estimate that BC’s economic growth significantly outpaced Canada’s in 2016 and expect BC’s economy to continue to grow faster than the national average throughout the forecast horizon (see Chart 2).

The Council remained optimistic about BC’s economic outlook over the near-term, supported by solid growth in employment and retail sales, as well as steady interprovincial in-migration. Further, most members expect that stronger commodity prices, a favourable exchange rate, and steady US growth will help support BC exports despite uncertainty over the potential drag from restrictive US trade policies.

With regards to BC’s housing market outlook, most members expect a gradual cooling in activity from the elevated levels experienced in recent years, marked by a decline in home sales and a moderation in home price acceleration. Several members remarked that BC’s housing market is supported by fundamentals such as strong employment growth, steady interprovincial and international in-migration, and favourable interest rates. Some members

The Economic Forecast Council, Budget 2017 Update

Introduction

The Budget Transparency and Accountability Act requires the Minister of Finance, in preparing the provincial budget, to consult the Economic Forecast Council (the Council or EFC) on British Columbia’s economic outlook. The 13-member Council is comprised of leading economists from several of Canada’s major banks and private research institutions. In preparation for Budget 2017 Update, Council members submitted revised surveys and comments to the Ministry on July 17, 2017.

The main issues raised by the Council include housing affordability and household debt, uncertainty over the effects of US trade policies, weaker demand from Asia on BC exports, aging demographics, and the opportunity for skills training and innovation within the province.

Forecast details from the Council’s surveys are summarized in the table at the end of this topic box.

British Columbia Outlook

Since the February 2017 budget, Council members have revised their outlook for BC real GDP growth in 2016 upwards in acknowledgement of stronger domestic activity. On average, the Council estimates that BC’s economic growth in 2016 was 3.7 per cent, up 0.6 percentage points from its previous forecast in January 2017. Council members now

3.1

2.3 2.2 2.1

3.7

3.0

2.3 2.2

0.0

1.0

2.0

3.0

4.0

2016 2017 2018 2019-21

January 2017 SurveyJuly 2017 Survey

BC Real GDP Annual per cent change

Source: Average of Economic Forecast Council forecasts

Chart 1 – EFC Outlook for BC

3.7

3.0

2.3 2.2

1.5

2.7

2.01.8

0.0

1.0

2.0

3.0

4.0

2016 2017 2018 2019-21

BC CanadaReal GDP Annual per cent change

Source: Average of Economic Forecast Council forecasts

Chart 2 – EFC Outlook for BC and Canada


Budget 2017 Update – 2017/18 to 2019/20

suggested densification and streamlining permitting processes in conjunction with local governments to help address supply constraints. Looking ahead, most members expect that rising interest rates will temper demand somewhat. Overall, Council members maintain the view that risks to BC’s housing outlook are tilted to the downside, citing the potential for further supply side constraints, reduced purchasing power for low-equity and first-time buyers, and financial vulnerabilities as interest rates rise. Several members anticipate a transition toward a soft landing for BC’s housing market, supported by underlying fundamentals.

The Council also acknowledged that the province’s forestry sector faces challenges such as the recently announced softwood lumber duties and tariffs, and limited availability of wood fibre due to damage caused by the mountain pine beetle. However, several members expect that a continued recovery in US homebuilding and favourable exchange rate may provide some offsetting support to BC exporters.

Other topics noted by Council members included the potential for expanding BC’s natural resource sector, infrastructure development, the importance of skilled labour

training, and the need to attract talent through immigration.

Canadian Outlook

The Council estimates that the Canadian economy expanded by 1.5 per cent in 2016, and projects real GDP growth of 2.7 per cent in 2017 and 2.0 per cent in 2018. The Council is calling for the Canadian economy to expand, on average, by 1.8 per cent annually during the 2019 to 2021 period.

Many members expect real GDP growth in Canada to lag behind BC in the coming years, citing BC’s potential for slightly stronger population and labour force growth compared to the national average.

International Outlook

On average, Council members estimate that US real GDP increased by 1.6 per cent in 2016 and project growth of 2.2 per cent in 2017 and 2.3 per cent in 2018, followed by average annual growth of 2.0 per cent during the 2019 to 2021 period.

Participants remarked on the significant uncertainty surrounding the US outlook as the timing and scope of major government policy

British Columbia Economic Forecast Council: Summary of BC real GDP forecasts, annual per cent change

AverageParticipant Organization 2016 2017 2018 2019-2021

Doug Porter ………………… Bank of Montreal ………………………… 3.7 3.2 2.3 2.2Cameron Muir ……………… BC Real Estate Association …………… 3.7 3.5 2.7 2.5Ken Peacock ……………… Business Council of BC ………………… 3.7 2.7 2.5 2.5Helmut Pastrick …………… Central 1 Credit Union …………………… 3.7 3.0 2.8 2.5Avery Shenfeld ……………… CIBC ……………………………………… 3.4 2.9 2.3 naMarie-Christine Bernard …… Conference Board ……………………… 3.9 2.5 2.0 1.8Arlene Kish ………………… IHS Markit ………………………………… 3.7 2.9 2.5 2.3Sébastien Lavoie …………… Laurentian Bank Securities ……………… 3.4 2.5 2.2 2.1Stéfane Marion ……………… National Bank …………………………… 3.7 2.9 2.2 2.0Craig Wright ………………… RBC ……………………………………… 3.6 3.0 1.8 2.2Jean-François Perrault …… Scotiabank ………………………………… 3.7 3.0 2.2 1.9Aaron Stokes ……………… Stokes Economic Consulting …………… 3.7 3.5 2.5 2.4Derek Burleton ……………… TD ………………………………………… 3.7 2.9 2.0 1.7Average …………………………………………………………………… 3.7 3.0 2.3 2.2Standard Deviation ………………………………………………………… 0.1 0.3 0.3 0.3


Budget 2017 Update – 2017/18 to 2019/20

proposals remain ambiguous. Meanwhile, some members noted that slowing global demand could weigh on BC and Canadian exports, especially with respect to slower growth expectations in China over the medium-term. In addition, a few members identified the potential drag on growth as a result of rising interest rates going forward.

Canadian Dollar

Consistent with previous forecasts, participants submitted divergent projections for the value of the Canadian dollar, with estimates for 2017 ranging from 75.5 US cents to 79.0 US cents. For 2018, forecasts ranged from 75.0 US cents

to 80.0 US cents and from 75.8 US cents to 82.3 US cents over the 2019 to 2021 period.

75.5 75.075.8

76.577.5

79.979.0

80.0 82.3

65.0

70.0

75.0

80.0

85.0

90.0

2017 2018 2019-21

EFC (low) EFC (average) EFC (high)

Source: Economic Forecast Council forecasts

US cents/ C$

Chart 3 – EFC Outlook for the Dollar

Forecast Survey – Participants’ Opinions

All figures are based 2016 2017

on annual averages Range Average 1 Range Average 1 Range Average 1 Range Average 1,2

British Columbia

Real GDP (% change) ………………… 3.4 – 3.9 3.7 (13) 2.5 – 3.5 3.0 (13) 1.8 – 2.8 2.3 (13) 1.7 – 2.5 2.2 (12)

Nominal GDP (% change) ……………… 3.6 – 6.1 5.1 (13) 3.6 – 6.2 5.3 (13) 3.4 – 5.3 4.3 (13) 3.0 – 5.2 4.2 (12)

GDP Deflator (% change) ……………… -0.1 – 2.4 1.4 (13) 1.0 – 3.2 2.3 (13) 1.4 – 2.8 2.0 (13) 1.3 – 2.7 2.0 (12)

Real business non-residentialinvestment (% change) ........................ -8.4 – 4.5 -1.2 (7) -2.9 – 4.0 2.1 (7) 1.3 – 5.8 3.6 (7) 2.1 – 11.4 4.5 (7)Real business machinery and equipment investment (% change) … 2.0 – 12.0 4.8 (6) -1.4 – 7.2 3.3 (6) 0.9 – 8.0 4.6 (6) 3.0 – 9.5 5.0 (6)

Household Income (% change) ……… 3.5 – 6.2 5.3 (9) 2.9 – 7.3 5.3 (9) 3.1 – 5.7 4.3 (9) 3.2 – 6.0 4.3 (9)

Net Migration (thousand persons) ……………………………… 49.5 – 52.9 51.8 (10) 42.8 – 55.1 48.6 (10) 36.5 – 58.8 47.6 (10) 35.5 – 58.9 46.6 (10)

Employment (% change) ……………… 3.1 – 3.2 3.1 (13) 2.3 – 4.0 3.3 (13) 0.7 – 2.2 1.4 (13) 6 0.7 – 1.8 1.3 (12)

Unemployment rate (%) ………………… 6.0 – 6.0 6.0 (13) 5.2 – 5.7 5.4 (13) 5.0 – 5.9 5.4 (13) 4.3 – 6.1 5.3 (12)

Net operating surplus of corporations (% change) ………… -14.3 – 10.0 0.2 (7) 1.5 – 26.9 9.9 (7) 2.0 – 8.0 4.9 (7) 3.0 – 5.0 4.3 (7)

Housing starts (thousand units) …………………………………… 41.8 – 43.0 42.0 (13) 33.0 – 40.2 37.6 (13) 28.0 – 39.4 34.7 (13) 28.0 – 37.0 31.8 (12)

Retail sales (% change) ………………… 6.3 – 7.4 7.1 (11) 4.0 – 7.0 6.1 (11) 2.0 – 6.5 4.5 (11) 2.3 – 5.0 4.0 (11)

Consumer price index (% change) …… 1.4 – 1.9 1.8 (13) 1.7 – 2.3 2.0 (13) 1.8 – 2.3 2.0 (13) 1.6 – 2.2 2.0 (12)

United States

Real GDP (% change) ………………… 1.5 – 1.6 1.6 (13) 2.0 – 2.3 2.2 (13) 2.1 − 2.7 2.3 (13) 1.8 − 2.4 2.0 (13)

Intended Federal Funds rate (%) ………………………………… 0.30 – 0.56 0.43 (12) 0.90 – 1.31 1.11 (12) 1.30 – 2.13 1.72 (12) 1.70 – 2.88 2.42 (12)

Housing starts (million units) …………… 1.17 – 1.20 1.18 (13) 1.21 – 1.40 1.27 (13) 1.29 – 1.60 1.36 (13) 1.30 – 1.80 1.46 (13)

Canada

Real GDP (% change) ………………… 1.4 – 1.5 1.5 (13) 2.4 − 2.8 2.7 (13) 1.9 − 2.3 2.0 (13) 1.4 − 2.2 1.8 (13)

Bank of Canada overnight target rate (%) ………………………… 0.50 – 0.50 0.50 (12) 0.50 – 1.50 0.73 (12) 0.75 – 2.54 1.28 (12) 1.00 – 2.85 1.90 (12)

Exchange rate (US cents/C$) ………… 75.4 – 76.0 75.7 (13) 75.5 – 79.0 76.5 (13) 75.0 – 80.0 77.5 (13) 75.8 – 82.3 79.9 (13)

Housing starts (thousand units) ……… 196 – 199 198 (13) 195 – 211 203 (13) 180 – 196 188 (13) 165 – 205 185 (13)

Consumer price index (% change) …… 1.4 – 1.6 1.4 (13) 1.5 – 2.0 1.8 (13) 1.8 – 2.2 2.0 (13) 1.5 – 2.2 2.0 (13)

1 Based on responses from participants providing forecasts. Number of respondents shown in parentheses.2 Participants provided an average forecast for 2019 to 2021.

2019 to 20212018

Budget 2017 Update – 2017/18 to 2019/20

2017/18 – Results to June 30, 2017

The following tables provide details on first quarterly results for the period ending June 30, 2017. Year-to-date results may not reflect the seasonality of certain activities, increased spending impacts of pressures such as wildfire management and other emergencies, or other new priority investments included in full year forecasts shown in Part 1: Three Year Fiscal Plan.

Part 4: 2017/18 FIRST QUARTERLY REPORT

Table 4.1 2017/18 Operating Statement

($ millions) Budget Actual VarianceActual

2016/17

Revenue ……………………………………………………………………… 12,812 13,361 549 12,579 Expense …………….....…....………………..……………………………… (12,397) (12,407) (10) (11,784)

Surplus ………………………………………………………………………… 415 954 539 795

Accumulated surplus beginning of the year ……………………………… 5,035 6,390 1,355 3,841 Accumulated surplus before comprehensive income …………………… 5,450 7,344 1,894 4,636 Accumulated other comprehensive income

from self-supported Crown agencies …………………………………… 28 (176) (204) (347) Accumulated surplus end of period …………………………………… 5,478 7,168 1,690 4,289

Year-to-Date to June 302017/18

94 2017/18 First Quarterly Report

Budget 2017 Update – 2017/18 to 2019/20

Table 4.2 2017/18 Revenue by Source


2016/17

TaxationPersonal income …………………………………………………………… 2,266 2,284 18 2,028 Corporate income ………………………………………………………… 1,467 1,468 1 1,330 Sales 1 ……………………………………………………………………… 1,707 1,764 57 1,676 Fuel ………………………………………………………………………… 216 231 15 236 Carbon ……………………………………………………………………… 303 305 2 277 Tobacco …………………………………………………………………… 217 212 (5) 218 Property …………………………………………………………………… 593 587 (6) 567 Property transfer …………………………………………………………… 406 548 142 633 Insurance premium ………………………………………………………… 135 145 10 130

7,310 7,544 234 7,095 Natural resources

Natural gas royalties ……..…………………...…………………………… 55 57 2 2 Forests ……………………………………………………………………… 134 151 17 154 Other natural resources 2 ………………………………………………… 299 413 114 347

488 621 133 503 Other revenue

Medical Services Plan premiums ………………………………………… 633 642 9 638 Other fees 3 ………………………………………………………………… 760 809 49 749 Investment earnings ……………………………………………………… 273 297 24 288 Miscellaneous 4 …………………………………………………………… 707 735 28 777

2,373 2,483 110 2,452

Contributions from the federal government Health and social transfers ……………………………………………… 1,668 1,668 - 1,618 Other federal contributions 5……………………………………………… 389 333 (56) 301

2,057 2,001 (56) 1,919 Commercial Crown corporation net income

BC Hydro …………………………………………………………………… 82 92 10 88 Liquor Distribution Branch ………………………………………………… 275 289 14 280 BC Lotteries (net of payments to the

federal government) …………………………………………………… 295 348 53 329 ICBC 6………………………………….…………………………………… (75) (17) 58 (91) Transportation Investment Corporation ………………………………… (21) (19) 2 (14) Other 7……………………………………………………………………… 28 19 (9) 18

584 712 128 610 Total revenue ……………………………………………………………… 12,812 13,361 549 12,579 1

2

3

4

5

6

7 Includes Columbia Power Corporation, BC Railway Company, Columbia Basin Trust power projects, and post-secondary institutions' self-supported subsidiaries.

Post-secondary, healthcare-related, motor vehicle, and other fees. Includes reimbursements for health care and other services provided to external agencies, and other recoveries.

Includes contributions for health, education, community development, housing and social service programs, and transportation projects.

Columbia River Treaty, other energy and minerals, water rental and other resources.

Amounts represent ICBC's earnings during government's fiscal year.


Includes provincial sales tax and social services tax/hotel room tax related to prior years.

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Budget 2017 Update – 2017/18 to 2019/20

2017/18 First Quarterly Report 95

Table 4.3 2017/18 Expense by Ministry, Program and Agency 1


2016/17 2

Office of the Premier ……………………………………………………………… 2 2 - 2 Advanced Education, Skills and Training ..................................................... 507 519 12 494 Agriculture ……………………………………………………………….............. 27 20 (7) 20 Attorney General ........................................................................................... 136 142 6 130 Children and Family Development ……………………………………………… 367 360 (7) 331 Citizens' Services ......................................................................................... 141 142 1 120 Education …………………………………………………………………………… 1,742 1,763 21 1,650 Energy, Mines and Petroleum Resources ………….…………………………… 24 21 (3) 12 Environment and Climate Change Strategy …………...……………………… 51 50 (1) 41 Finance …………………………………………………………………………… 91 70 (21) 73 Forests, Lands, Natural Resource Operations and Rural Development …… 137 162 25 184 Health ……………………………………………………………………………… 4,627 4,496 (131) 4,368 Indigenous Relations and Reconciliation ……………………………………… 8 31 23 31 Jobs, Trade and Technology …………………………………………………… 23 25 2 32 Labour ……………………………………………………………………………… 3 2 (1) 3 Mental Health and Addictions …………………………………………………… - - - - Municipal Affairs and Housing …………………………………………………… 278 275 (3) 277 Public Safety and Solicitor General .............................................................. 190 212 22 177 Social Development and Poverty Reduction ................................................ 743 752 9 701 Tourism, Arts and Culture ………………………………………………………… 30 30 - 35 Transportation and Infrastructure ……………………………………………… 203 204 1 201

Total ministries and Office of the Premier ………………………………… 9,330 9,278 (52) 8,881 Management of public funds and debt ………………………………………… 293 289 (4) 288 Contingencies ……………………………………………...……………………… - 1 1 2 Funding for capital expenditures ……………………………………………...… 129 44 (85) 78 Refundable tax credit transfers ……………………………………………...…… 290 290 - 294 Legislative Assembly and other appropriations ………………………………… 63 57 (6) 33

Subtotal ………………..………………………………………………………… 10,105 9,959 (146) 9,576 Elimination of transactions between

appropriations 3 ………………………………………………………………… (14) (4) 10 (4) Prior year liability adjustments …………………………………………………… - - - (1)

Consolidated revenue fund expense ………………..………………………… 10,091 9,955 (136) 9,571 Expenses recovered from external entities …………………………………… 620 635 15 610 Funding provided to service delivery agencies …………………………….… (6,204) (5,970) 234 (5,935)

Total direct program spending ………………..………………………………… 4,507 4,620 113 4,246 Service delivery agency expense

School districts …………………………………………………………………… 1,890 1,802 (88) 1,784 Universities ………………………………………………………………………… 1,068 1,064 (4) 1,000 Colleges and institutes …………………………………………………………… 293 298 5 283 Health authorities and hospital societies ……………………………………… 3,580 3,669 89 3,471 Other service delivery agencies ………………………………………………… 1,059 954 (105) 1,000

Total service delivery agency expense ………………..……………………… 7,890 7,787 (103) 7,538

Total expense ……………………………………………………………………… 12,397 12,407 10 11,784 1 Reflects government's re-organization effective July 18, 2017.2 Restated to reflect government's current accounting policies.3 Reflects payments made under an agreement where an expense from a voted appropriation is recorded as revenue by a special account.


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Budget 2017 Update – 2017/18 to 2019/20

Table 4.4 2017/18 Expense By Function


2016/17 1

Health:

Medical Services Plan ………………………………………………………… 1,163 1,114 (49) 1,085 Pharmacare ……………………………………………………………………… 291 314 23 318 Regional services ……………………………………………………………… 3,490 3,471 (19) 3,241 Other healthcare expenses 2…………………………………………………… 167 184 17 153

5,111 5,083 (28) 4,797 Education:

Elementary and secondary …………………………………………………… 2,004 1,945 (59) 1,904 Post-secondary ………………………………………………………………… 1,263 1,355 92 1,270 Other education expenses 3…………………………………………………… 121 85 (36) 85

3,388 3,385 (3) 3,259

Social services:Social assistance 2,3……………………………………………………………… 462 460 (2) 418 Child welfare 2…………………………………………………………………… 348 339 (9) 316 Low income tax credit transfers ……………………………………………… 62 62 - 62 Community living and other services ………………………………………… 231 244 13 229

1,103 1,105 2 1,025 Protection of persons and property ……………………………………………… 391 405 14 362 Transportation …………………………………………………………………… 388 390 2 392 Natural resources and economic

development …………………………………………………………………… 545 546 1 541 Other ........................................................................................................... 433 437 4 427 General government ……………………………………………………………… 395 402 7 343 Debt servicing …………………………………………………………………… 643 654 11 638

Total expense …………………………………………………………………… 12,397 12,407 10 11,784 1

2

3

Payments for healthcare services by the Ministry of Social Development and Poverty Reduction and the Ministry of Children and Family Development made on behalf of their clients are reported in the Health function.

Payments for training costs by the Ministry of Social Development and Poverty Reduction made on behalf of its clients are reported in the Education function.


Restated to reflect government's current organization and accounting policies.

Budget 2017 Update – 2017/18 to 2019/20


Table 4.5 2017/18 Capital Spending


2016/17

Taxpayer-supportedEducation

School districts ……………………………………………………………… 159 116 (43) 115 Post-secondary institutions ………………………………………………… 224 105 (119) 82

Health …………………………………………………………………………… 210 134 (76) 173 BC Transportation Financing Authority ……………………………………… 292 165 (127) 221 BC Transit ............................................................................……………… 38 22 (16) 3 Government operating (ministries) …………………………………………… 128 29 (99) 30 Housing ………………………………………..……………………………… 76 33 (43) 65 Other 1 …………………………………………………………………………… 19 5 (14) 4

Total taxpayer-supported …………………………………………………… 1,146 609 (537) 693

Self-supportedBC Hydro ……………………………………………………………………… 589 576 (13) 580 Columbia River power projects 2 …………………………………………… 3 1 (2) 1 Transportation Investment Corporation ……………………………………… 18 12 (6) 1 BC Rail ………………………………………………………………………… 5 1 (4) 3 ICBC …………………………………………………………………………… 14 10 (4) 22 BC Lottery Corporation ……………………………………………………… 22 4 (18) 13 Liquor Distribution Branch …………………………………………………… 19 4 (15) 2

Total self-supported ………………………………..……………………… 670 608 (62) 622

Total capital spending ……………………………………………………… 1,816 1,217 (599) 1,315 1

2 Joint ventures of the Columbia Power Corporation and Columbia Basin Trust.

Includes BC Pavilion Corporation, other service delivery agencies, and beginning in 2017/18, Tranportation Investment Corporation.


j:\FEP\ECB\quarterly\2005_06\q2\fiscal\tables\debt and capital\Table 4.5 Q1 2017-18 Capital – June 2017-08-28 1:00 PM


Budget 2017 Update – 2017/18 to 2019/20

Table 4.6 2017/18 Provincial Debt 1


2016/17

Taxpayer-supported debtProvincial government operating ……………………………………… 5,167 3,822 (1,345) 7,325 Other taxpayer-supported debt (mainly capital)Education 2

Post-secondary institutions 3 …………………………………………… 5,038 4,807 (231) 4,615 School districts …………………………………………………………… 8,605 8,254 (351) 7,904

13,643 13,061 (582) 12,519 Health 2,4……………………………………………………………………… 7,667 7,251 (416) 6,764 Highways and public transit

BC Transit ………………………………………………………………… 93 92 (1) 107 BC Transportation Financing Authority 5 ………………………………… 10,242 9,867 (375) 9,030 Public transit ……………………………………………………………… 1,000 1,000 - 1,000 SkyTrain extension ……………………………………………………… 1,174 1,174 - 1,174

12,509 12,133 (376) 11,311 Other

BC Immigrant Investment Fund ………………………………………… 201 196 (5) 321 BC Pavilion Corporation ………………………………………………… 400 375 (25) 379 Provincial government general capital ………………………………… 2,301 2,318 17 1,848 Social housing 6 …………………………………………………………… 714 695 (19) 719 Other 7 ……………………………………………………………………… 26 38 12 26

3,642 3,622 (20) 3,293

Total other taxpayer-supported ……………………………………… 37,461 36,067 (1,394) 33,887

Total taxpayer-supported debt …………………………………………… 42,628 39,889 (2,739) 41,212

Self-supported debtCommercial Crown corporations

BC Hydro …………………………………………………………………… 19,822 19,917 95 17,713 BC Lotteries ………………………………………………………………… 161 185 24 220 Columbia Power Corporation …………………………………………… 291 286 (5) 296 Columbia River power projects 8 ………………………………………… 448 440 (8) 447 Post-secondary institutions' subsidiaries ……………………………… 310 340 30 225 Transportation Investment Corporation………………………………… 3,621 3,480 (141) 3,412 Other ……………………………….……………………………………… 32 31 (1) 34

Total self-supported debt ………………………………………………… 24,685 24,679 (6) 22,347 Total provincial debt ………………………………………………………… 67,313 64,568 (2,745) 63,559 1

2

3

4

5

6

7

8

Year-to-Date to June 30

Joint ventures of the Columbia Power Corporation and Columbia Basin Trust.

2017/18


Includes debt and guarantees incurred by the government on behalf of school districts, universities, colleges and health authorities/hospital societies (SUCH), and debt directly incurred by these entities.

Includes the BC Housing Management Commission and the Provincial Rental Housing Corporation. Social housing debt includes public-private partnership obligations of $89 million for the three months ended June 30, 2016 and $82 million for the three months ended June 30, 2017.

Includes service delivery agencies, student loan guarantees, loan guarantees to agricultural producers, guarantees issued under economic development and home mortgage assistance programs and loan guarantee provisions.

BC Transportation Financing Authority debt includes public-private partnership obligations of $1,004 million for the three months ended June 30, 2016 and $815 million for the three months ended June 30, 2017.

Post-secondary institutions' debt includes public-private partnership obligations of $28 million for the three months ended June 30, 2016 and $58 million for the three months ended June 30, 2017.Health facilities' debt includes public-private partnership obligations of $1,477 million for the three months ended June 30, 2016 and $1,597 million for the three months ended June 30, 2017.

Budget 2017 Update – 2017/18 to 2019/20


Table 4.7 2017/18 Statement of Financial PositionActual Year-to-Date

March 31, June 30,($ millions) 2017 2017

Financial assetsCash and temporary investments ……………………………………………………………… 4,232 3,260 Other financial assets …………………………………………………………………………… 10,260 10,827 Sinking funds ……………………………………………………………………………………… 1,087 1,105 Investments in commercial Crown corporations:

Retained earnings ……………………………………………………………………………… 7,511 7,216 Recoverable capital loans ……………………………………………………………………… 23,848 24,174

31,359 31,390 46,938 46,582

LiabilitiesAccounts payable and accrued liabilities ……………………………………………………… 8,937 8,858 Deferred revenue ………………………………………………………………………………… 9,661 9,747 Debt:

Taxpayer-supported debt ……………………………………………………………………… 41,506 39,889 Self-supported debt …………………………………………………………………………… 24,377 24,679

Total provincial debt ……………………………………………………………………………… 65,883 64,568 Add: debt offset by sinking funds …………………………………………………………… 1,087 1,105 Less : guarantees and non-guaranteed debt ………………………………………………… (835) (827)

Financial statement debt ………………………………………………………………………… 66,135 64,846 84,733 83,451

Net liabilities ………………………………………………………………………………………… (37,795) (36,869) Capital and other non-financial assets

Tangible capital assets …………………………………………………………………………… 41,303 41,385 Other non-financial assets ……………………………………………………………………… 2,882 2,652

44,185 44,037 Accumulated surplus ……………………………..……………………………………………… 6,390 7,168

Changes in Financial PositionYear-to-Date

June 30,($ millions) 2017

(Surplus) deficit for the period …………………………………………………………………………………… (954) Comprehensive income (increase) decrease …………………………………………………………………… 176

(Increase) decrease in accumulated surplus ………………………………………………………………................. (778) Capital and other non-financial asset changes:

Increase in taxpayer-supported capital investments …………………………………………………………… 609 Less: amortization and other accounting changes …………………………………………………………… (527) Change in net capital assets ……………………………………………………………………………………… 82

Increase (decrease) in other non-financial assets ……………………………………………………………… (230) (148)

Increase (decrease) in net liabilities .......................................................................................................... (926) Investment and working capital changes:

Increase (decrease) in cash and temporary investments ……………………………………………………… (972) Increase in total investment in commercial Crown corporations:

Increase (decrease) in retained earnings ……………………………………………………………………… (295) Self-supported capital investments ……………………………………………………………………………… 608 Less: loan repayments and other accounting changes ……………………………………………………… (282)

31 Other working capital changes ……………………………………………………………………………………… 578

(363) Increase (decrease) in financial statement debt ……………………………………………………………… (1,289)

(Increase) decrease in sinking fund debt ………………………………………………………………………… (18) Increase (decrease) in guarantees and non-guaranteed debt ………………………………………………… (8)

Increase (decrease) in total provincial debt …………………………………………………………………… (1,315)

Budget 2017 Update – 2017/18 to 2019/20

APPENDIX

A1 Tax Expenditures ....................................................................................................................... 103A1.1 Personal Income Tax – Tax Expenditures ................................................................................... 105A1.2 Corporate Income Tax – Tax Expenditures ................................................................................ 106A1.3 Property Taxes – Tax Expenditures ............................................................................................. 106A1.4 Consumption Taxes – Tax Expenditures .................................................................................... 107A2 Interprovincial Comparisons of Tax Rates – 2017 ...................................................................... 108A3 Comparison of Provincial and Federal Taxes by Province – 2017 ............................................... 109A4 Interprovincial Comparisons of Provincial Personal Income Taxes Payable – 2017 ..................... 111A5 Material Assumptions – Revenue ............................................................................................... 112A6 Natural Gas Price Forecasts – 2017/18 to 2019/20 .................................................................... 117A7 Material Assumptions – Expense ............................................................................................... 118A8 Operating Statement – 2010/11 to 2019/20 .............................................................................. 121A9 Revenue by Source – 2010/11 to 2019/20 ................................................................................. 122A10 Revenue by Source Supplementary Information – 2010/11 to 2019/20 ..................................... 123A11 Expense by Function – 2010/11 to 2019/20 .............................................................................. 124A12 Expense by Function Supplementary Information – 2010/11 to 2019/20 ................................. 125A13 Full-Time Equivalents (FTEs) 2010/11 to 2019/20 ................................................................... 126A14 Capital Spending – 2010/11 to 2019/20 .................................................................................... 127A15 Statement of Financial Position – 2010/11 to 2019/20 .............................................................. 128A16 Changes in Financial Position – 2010/11 to 2019/20 ................................................................ 129A17 Provincial Debt – 2010/11 to 2019/20 ...................................................................................... 130A18 Provincial Debt Supplementary Information – 2010/11 to 2019/20 .......................................... 131A19 Key Provincial Debt Indicators – 2010/11 to 2019/20 .............................................................. 132

Budget 2017 Update – 2017/18 to 2019/20

Appendix 103

A1: Tax Expenditures

Introduction

A tax expenditure is the reduction in revenues from delivering government programs or benefits through the tax system. Tax expenditures are usually made by offering special tax rates, exemptions, or tax credits. Governments introduce tax expenditures primarily to achieve social policy objectives such as transfers to lower-income families or to promote economic development and job creation.

Reporting tax expenditures improves government accountability by providing a more complete picture of government activities. The tax expenditure appendix does not include tax expenditures introduced or expanded in Budget 2017 Update. These are described in Part 2: Tax Measures. Beginning with Budget 2012, refundable tax transfers are accounted for in a voted appropriation. This change does not affect the reporting of tax expenditure costs in the following tables.

The Role of Tax Expenditure Programs

Using the tax system to deliver programs can reduce administration costs and compliance costs for recipients. In certain situations, the tax system allows intended beneficiaries to be readily identified from information that is already collected. In these cases, setting up a separate expenditure program would result in costly overlap and duplication of effort. An example is the BC low income climate action tax credit, which is delivered through the income tax system. If this were a direct provincial expenditure program, a provincial agency or office would have to be established to duplicate much of the work already done by the Canada Revenue Agency. In addition, it would require individuals to undertake a separate, time-consuming application process to qualify for the benefit.

There are, however, several potential drawbacks to tax expenditure programs. First, their overall cost often receives less public scrutiny than is the case for spending programs because annual budget appropriations by the legislature are not typically required. Second, tax expenditure programs do not always effectively target those who are intended to benefit from them. Some tax expenditure programs that are intended to provide tax relief for lower-income earners may, in reality, confer the greatest benefit on higher-income earners who pay the most taxes. Finally, costs are often more difficult to control under a tax expenditure program because the benefits tend to be more open-ended and enforcement is often more difficult than for spending programs.

Tax Expenditure Reporting

Not all tax reductions, credits, exemptions and refunds are classed as tax expenditures.

The emphasis is on tax reductions, credits, exemptions and refunds that are close equivalents to spending programs. By implication, the list does not include tax measures designed to meet broad tax policy objectives such as improving fairness in the tax system, or measures designed to simplify the administration of a tax. The list also does not include anything that is not intended to be part of a tax base.

Tax expenditures that cost less than $2 million are generally not included. Where practical, smaller items have been presented together as an aggregate figure.

104 Appendix

Budget 2017 Update – 2017/18 to 2019/20

British Columbia Tax Expenditures

The following tables report tax expenditure estimates.

The cost of individual tax expenditures cannot be added together to reach a total tax expenditure figure for two reasons:• insomecasestheprogramsinteractwithoneanothersothateliminatingoneprogram

could increase or decrease the cost of another; and• eliminatingcertaintaxexpenditureprogramscouldchangethechoicestaxpayers

make, which in turn would affect the cost estimates.

The estimates for each tax expenditure are based on a static analysis of the costs and do not take into account any behavioural changes, which could change the costs over time. In addition, estimates are generally recalculated each year using current data sources and using refinements to the methods of estimation that can result in significant changes to the value of a given tax expenditure from prior years’ reports.

In Table A1.1, Personal Income Tax – Tax Expenditures, the list of tax expenditures delivered through the income tax system has been separated into two sub-categories.• Provincial Measures: This includes all major tax expenditures that are under provincial

policy control.• Federal Measures: British Columbia shares the cost of some federal income tax

expenditure programs because, under the tax collection agreement between British Columbia and the federal government, the Province has agreed to maintain a consistent income tax base with the federal government in the interest of reducing administration and compliance costs.

Budget 2017 Update – 2017/18 to 2019/20

Appendix 105

Table A1.1 Personal Income Tax – Tax Expenditures

($ millions)Personal Income Tax

Provincial MeasuresBC early childhood tax benefit ......................................................................................................................... 139 Low income climate action tax credit ............................................................................................................... 195 Sales tax credit ................................................................................................................................................ 49 Training tax credit ............................................................................................................................................ 4 Venture capital tax credit .............................................................................……………………………………… 27 BC mining flow-through share tax credit .......................................................................................................... 10 Political contributions tax credit ........................................................................................................................ 3 Home renovation tax credit for seniors and persons with disabilities .............................................................. 2 Provincial non-refundable credits: 1

• Charitable donations tax credit .................................................................................................................. 208 • Tax credits for tuition and education .......................................................................................................... 52 • Tax credits for persons with disability and medical expenses ................................................................... 91 • Pension income tax credit .......................................................................................................................... 28 • Credit for persons age 65 and older .......................................................................................................... 66 • Spousal and equivalent-to-spouse credits ................................................................................................. 74 • Tax credit for Canada Pension Plan contributions ..................................................................................... 161 • Tax credit for Employment Insurance premiums paid ............................................................................... 56 • Children's fitness and arts tax credits ........................................................................................................ 9

Federal Measures 2Pension income splitting .................................................................................................................................. 71 Child care expense deduction ......................................................................................................................... 49 Exemption from capital gains for small businesses and family farms .............................................................. 88 Deduction for residents of northern and isolated areas ................................................................................... 10 Non-taxation of business-paid health and dental benefits ............................................................................... 125 Registered Retirement Savings Plans: 3

• exemption for – contributions ...................................................................................................... 378 – investment earnings ........................................................................................... 603

• taxation of withdrawals .................................................................................................................. (274) Total .................................................................................................................................. 707

Registered Pension Plans: 3

• exemption for – contributions ...................................................................................................... 752 – investment earnings ........................................................................................... 873

• taxation of withdrawals .................................................................................................................. (449) Total .................................................................................................................................. 1,176

Tax-Free Savings Accounts ............................................................................................................................. 39 1

2

3

These measures are federal measures but the estimates show only the foregone provincial revenue. Each measure is calculated from the 2016 federal cost projections as reported in the Government of Canada's Report on Federal Tax Expenditures 2016 by applying British Columbia residents' share of the measure and the relevant tax rates. Certain tax expenditure items have been excluded where no data were available or the amounts were immaterial.

2016/17 Estimated Cost

Provincial non-refundable credits are generally based on estimates of credit claims by British Columbia residents.

Registered Retirement Savings Plans and Registered Pension Plans are treated in the same way as in the federal tax expenditure report. The tax expenditure associated with these plans is presented as the amount of tax that would otherwise be paid in the year of deferral, were the deferral not available. However, this type of estimate overstates the true costs of these preferences because taxes are eventually paid, including tax on investment earnings. An estimate that does not overstate these costs would, however, be difficult to develop and would require some largely speculative assumptions.

106 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A1.2 Corporate Income Tax – Tax Expenditures

($ millions)

Corporate Income Tax 1

Charitable donations deduction 2 ..................................................................................................................... 32 Training tax credit 3 .......................................................................................................................................... 8 Film and television tax credits:

• Film Incentive BC tax credit 4 ......................................................................................................... 51 • Production services tax credit 5 ...................................................................................................... 340 Total ...................................................................................................................................... 391

International business activities tax refund 6 .................................................................................................... 19 Scientific research and experimental development tax credit 7 ........................................................................ 148 Mining exploration tax credit 8 .......................................................................................................................... 40 Book publishing tax credit ................................................................................................................................ 3 Interactive digital media tax credit 9 .................................................................................................................. 65

1

2

3

4

5

6

7

8

9

Table A1.3 Property Taxes – Tax Expenditures

($ millions)

School and Rural Area Property Tax Assessment exemption of $10,000 for industrial and business properties 1 .................................................... 8 Overnight tourist accommodation assessment relief 1 ..................................................................................... 3 Home owner grant 2 ......................................................................................................................................... 797

Property Transfer TaxExemptions for the following:

• First-time home buyers .............................................................................................................................. 85 • Newly built homes ...................................................................................................................................... 77 • Property transfers between related individuals .......................................................................................... 130 • Property transfers to municipalities, regional districts, hospital districts, library boards, school boards, water districts and educational institutions ................................................. 9 • Property transfers to charities registered under the Income Tax Act (Canada) ........................................ 11

1

2

Includes prior year adjustment of -$61 million. Includes prior year adjustment of -$39 million.

The deduction offered for corporate charitable donations is a federal measure, but the estimate shows only the foregone provincial revenue. This is calculated from the 2016 federal cost projection as reported in Government of Canada's Report on Federal Tax Expenditures 2016 by applying British Columbia's share of corporate taxable income and the relevant tax rates to the federal estimate and increasing it by corporate income tax revenue growth.


Includes prior year adjustments for refundable tax credits.

Includes prior year adjustment of -$2 million.

Includes employee income tax refunds.

Includes prior year adjustment of +$9 million.Includes prior year adjustment of -$2 million.


Estimates are for the 2016 calendar year and include only school and rural area property taxes levied by the Province.

The home owner grant includes the northern and rural home owner benefit.

Includes prior year adjustment of -$2 million.

Budget 2017 Update – 2017/18 to 2019/20

Appendix 107

Table A1.4 Consumption Taxes – Tax Expenditures

($ millions)

Fuel Tax 1

Tax exemption for alternative fuels .................................................................................................................. 15 Tax exemption for international flights (jet fuel) ............................................................................................... 20 Tax exemptions for farmers 2 ........................................................................................................................... 8

Provincial Sales Tax 1

Exemptions for the following items:• Food (basic groceries, snack foods, candies, non-alcoholic beverages and restaurant meals) ................ 1,263 • Residential energy (e.g. electricity, natural gas, fuel oil) ........................................................................... 223 • Prescription and non-prescription drugs, vitamins and certain other health care products ....................... 234 • Children's clothing and footwear ................................................................................................................ 47 • Clothing patterns, fabrics and notions ....................................................................................................... 4 • Specified school supplies .......................................................................................................................... 26 • Books, magazines and newspapers .......................................................................................................... 39 • Basic land-line telephone and cable service .............................................................................................. 59 • "1-800" and equivalent telephone services ................................................................................................ 3 • Specified safety equipment ........................................................................................................................ 26 • Labour to repair major household appliances, clothing and footwear ....................................................... 8 • Livestock for human consumption, and feed, seed and fertilizer ............................................................... 56 • Specified energy conservation equipment ................................................................................................. 16 • Bicycles ...................................................................................................................................................... 14

1 Estimates are based on Statistics Canada data and/or administrative data.2 Estimate is for both motor fuel tax and carbon tax.


108 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A2 Interprovincial Comparisons of Tax Rates – 2017 (Rates known and in effect as of August 15, 2017)

Corporate income tax (per cent of taxable income)

General rate 1 ..................... 11 12 11.5 12 11.5 11.8 14 16 16 15Manufacturing rate 2 ............ 11 12 9.5 12 10 11.8 14 16 16 15Small business rate 3 .......... 2 2 2 0 4.5 8 3 3 4.5 3Small business threshold ($000s) ............................. 500 500 500 450 500 500 500 500 500 500

Corporation capital tax (per cent)Financial 4 ........................... Nil Nil 0.7/4 6 Nil Nil 4/5 4 5 6

Health care premiums/month ($)Individual/family 5 ................ 75/150 Nil Nil Nil Nil Nil Nil Nil Nil Nil

Payroll tax (per cent) 6 ............. Nil Nil Nil 2.15 1.95 4.26 Nil Nil Nil 2

Insurance premium tax(per cent) 7 ................................ 2-4.4 3-4 3-4 2-3 2-3.5 3.48 2-3 3-4 3.75-4 5Fuel tax (cents per litre) 8

Gasoline .............................. 21.17 17.49 15.0 14.0 22.3 29.2 24.7 24.7 22.3 34.6Diesel .................................. 22.67 18.35 15.0 14.0 21.5 29.3 30.7 23.9 29.5 31.5

Sales tax (per cent) 9

General rate ........................ 7 Nil 6 8 8 9.975 10 10 10 10Tobacco tax (dollars percarton of 200 cigarettes) 10 ...... 47.80 50.00 60.63 68.24 40.11 29.80 61.80 66.20 60.66 59.56

1 British Columbia intends to increase its general rate to 12 per cent effective January 1, 2018. 2

3 British Columbia intends to decrease its small business rate to 2 per cent effective retroactively to April 1, 2017. 4

5

6

7

8

9

10

Tax rates shown are statutory rates. Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador have harmonized their sales taxes with the federal GST. Alberta imposes a 4 per cent tax on short-term rental accommodation.

In Saskatchewan, small financial corporations pay the rate of 0.7 per cent on their capital. A small financial corporation has less than $1.5 billion in taxablecapital. Large financial corporations are subject to the 4 per cent rate for all taxable capital. In New Brunswick, trust and loan companies are subject to the rate of 4 per cent, while banks are subject to the rate of 5 per cent.

Manitoba Ontario Quebec New Brunswick

Includes estimated provincial sales tax in all provinces except British Columbia, Alberta and Quebec. British Columbia intends to increase its tobacco tax rate to $49.40 per carton effective on a date to be set be regulation.

TaxNova Scotia

Newfound-land and Labrador

Prince Edward Island

Tax rates are for regular fuel used on highways and include all provincial taxes payable by consumers at the pump. The British Columbia rates include 6.75 cents per litre dedicated to the BC Transportation Financing Authority and the carbon tax rates of 6.67 cents per litre for gasoline and 7.67 cents per litre for diesel. The British Columbia rates do not include regional taxes that increase the gasoline and diesel tax rates by 11 cents per litre in the South Coast British Columbia transportation service region and by 3.5 cents per litre in the Capital Regional District. The Alberta rates include carbon levy rates of 4.49 cents per litre for gasoline and 5.35 cents per litre for diesel. The tax rates for Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador include provincial sales tax based on average pump prices as of August 2017. Quebec's tax rates do not include increased or reduced regional tax rates, such as an additional tax of 3 cents per litre on gasoline in the Montreal area.

British Columbia intends to reduce Medical Services Plan premiums by 50 per cent effective January 1, 2018. Ontario levies a health premium, as part of its provincial personal income tax system, of up to $900 per year. Provinces with payroll taxes provide payroll tax relief for small businesses. Quebec also levies a compensation tax of up to 4.48 per cent on salaries and wages paid by financial institutions. Lower rates apply to premiums for life, sickness and accident insurance; higher rates apply to premiums for property insurance including automobile insurance. In Manitoba, Ontario, Quebec, and Newfoundland and Labrador, specific sales taxes also apply to certain insurance premiums except, generally, those related to individual life and health.

British Columbia Alberta Saskat-

chewan

In British Columbia (and some other provinces), the general rate applies to income from manufacturing and processing. In Quebec, the rate for manufacturing corporations eligible for the small business rate is 4 per cent; the rate for other manufacturing corporations is the general rate.

Budget 2017 Update – 2017/18 to 2019/20

Appendix 109

Table A3 Comparison of Provincial and Federal Taxes by Province – 2017

Two Income Family of Four - $90,000 ( $ )1. Provincial Income Tax…………………… 3,072 3,994 3,568 5,670 3,455 7,121 5,834 6,767 6,736 5,815

Net Child Benefits………………………… -660 0 0 -- 0 -2,257 0 0 -- 02. Property Tax - Gross………………….. 4,136 3,578 4,955 3,945 5,471 5,525 5,300 4,455 3,721 3,316

- Net…………………….. 3,566 3,578 4,955 3,945 5,471 5,525 5,300 4,455 3,721 3,3163. Sales Tax………………………………… 1,564 0 1,468 1,907 2,224 2,835 2,747 2,697 2,411 2,6534. Fuel Tax…………………………………… 218 195 225 210 335 438 371 371 335 5195. Net Carbon Tax ………………………… 236 -105 -- -- -- -- -- -- -- --6. Provincial Direct Taxes………………… 7,996 7,662 10,216 11,732 11,484 13,661 14,252 14,290 13,202 12,3027. Health Care Premiums/Payroll Tax…… 1,800 -- -- 1,935 1,755 3,834 -- -- -- 1,8008. Total Provincial Tax……………………… 9,796 7,662 10,216 13,667 13,239 17,495 14,252 14,290 13,202 14,1029. Federal Income Tax……………………… 7,770 7,770 7,770 7,770 7,770 7,745 7,770 7,770 7,770 7,770

10. Net Federal GST………………………… 1,474 1,568 1,511 1,379 1,427 1,354 1,384 1,359 1,399 1,33711. Total Tax………………………………… 19,041 17,000 19,497 22,816 22,437 26,594 23,406 23,420 22,372 23,209

Two Income Family of Four - $60,0001. Provincial Income Tax…………………… 1,216 1,555 590 2,551 767 2,999 3,047 3,544 3,715 3,037

Net Child Benefits………………………… -660 -448 0 -- 0 -3,357 0 0 -- 02. Property Tax - Gross………………….. 3,011 2,904 3,302 3,190 3,924 3,798 2,947 2,795 2,959 2,283

- Net…………………….. 2,441 2,904 3,302 3,190 3,924 3,798 2,947 2,795 2,959 2,2833. Sales Tax………………………………… 1,303 0 1,259 1,637 1,842 2,539 1,960 2,293 1,943 2,2544. Fuel Tax…………………………………… 218 195 225 210 335 438 371 371 335 5195. Net Carbon Tax ………………………… 208 -106 -- -- -- -- -- -- -- --6. Provincial Direct Taxes………………… 4,725 4,099 5,375 7,587 6,869 6,417 8,325 9,003 8,951 8,0937. Health Care Premiums/Payroll Tax…… 1,800 -- -- 1,290 1,170 2,556 -- -- -- 1,2008. Total Provincial Tax……………………… 6,525 4,099 5,375 8,877 8,039 8,973 8,325 9,003 8,951 9,2939. Federal Income Tax……………………… 4,001 4,001 4,001 4,001 4,001 3,984 4,001 4,001 4,001 4,001

10. Net Federal GST………………………… 1,228 1,339 1,295 1,183 1,225 1,220 1,180 1,155 1,187 1,13611. Total Tax………………………………… 11,754 9,439 10,671 14,061 13,264 14,177 13,506 14,159 14,139 14,430

Two Income Family of Four - $30,0001. Provincial Income Tax…………………… 0 0 -824 -460 -593 -3,302 0 305 377 0

Net Child Benefits………………………… -660 -1,393 0 -- -2,087 -3,613 -52 0 -- 02. Property Tax ……………………………… - - - - - - - - - - 3. Sales Tax………………………………… 1,060 0 988 1,347 507 2,298 1,131 1,866 1,507 9914. Fuel Tax…………………………………… 145 130 150 140 223 292 247 247 223 3465. Net Carbon Tax ………………………… -126 -106 -- -- -- -- -- -- -- --6. Provincial Direct Taxes………………… 420 -1,369 314 1,027 -1,950 -4,325 1,326 2,418 2,107 1,3377. Health Care Premiums/Payroll Tax…… 0 -- -- 645 585 1,278 -- -- -- 6008. Total Provincial Tax……………………… 420 -1,369 314 1,672 -1,365 -3,047 1,326 2,418 2,107 1,9379. Federal Income Tax……………………… 256 256 256 256 256 248 256 256 256 256

10. Net Federal GST………………………… 151 233 169 125 212 262 125 92 122 11011. Total Tax………………………………… 827 -880 739 2,053 -897 -2,538 1,707 2,766 2,485 2,303

Unattached Individual - $25,0001. Provincial Income Tax…………………… 301 349 361 694 240 -187 649 949 1,356 1,0152. Property Tax…………...………………… -- -- -- -- -- -- -- -- -- --3. Sales Tax………………………………… 477 0 457 600 484 940 621 886 656 4294. Fuel Tax…………………………………… 145 130 150 140 223 292 247 247 223 3465. Net Carbon Tax ………………………… -49 -59 -- -- -- -- -- -- -- --6. Provincial Direct Taxes………………… 873 420 968 1,434 947 1,045 1,517 2,082 2,236 1,7907. Health Care Premiums/Payroll Tax…… 0 -- -- 538 488 1,065 -- -- -- 5008. Total Provincial Tax……………………… 873 420 968 1,971 1,434 2,110 1,517 2,082 2,236 2,2909. Federal Income Tax……………………… 1,405 1,405 1,405 1,405 1,405 1,398 1,405 1,405 1,405 1,405

10. Net Federal GST………………………… 58 85 63 30 46 35 41 24 27 2011. Total Tax………………………………… 2,336 1,909 2,436 3,406 2,885 3,542 2,963 3,510 3,667 3,715

Quebec New Brunswick

Nova Scotia


New-foundland

and Labrador

OntarioTax

British Columbia Alberta Saskat-chewan Manitoba

110 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A3 Comparison of Provincial and Federal Taxes by Province – 2017 (continued )

Unattached Individual - $80,000 ( $ )1. Provincial Income Tax…………………… 3,959 5,161 6,400 6,979 5,078 8,921 7,525 8,401 8,041 7,5562. Property Tax - Gross………………….. 2,060 2,873 3,582 4,711 3,803 5,041 2,396 3,672 2,727 2,342

- Net…………………….. 1,490 2,873 3,582 4,711 3,803 5,041 2,396 3,672 2,727 2,3423. Sales Tax………………………………… 1,119 0 1,036 1,350 1,664 1,962 2,021 1,973 1,758 1,9314. Fuel Tax…………………………………… 218 195 225 210 335 438 371 371 335 5195. Net Carbon Tax ………………………… 186 196 -- -- -- -- -- -- -- --6. Provincial Direct Taxes………………… 6,971 8,425 11,242 13,250 10,880 16,362 12,313 14,416 12,861 12,3497. Health Care Premiums/Payroll Tax…… 900 -- -- 1,720 1,560 3,408 -- -- -- 1,6008. Total Provincial Tax……………………… 7,871 8,425 11,242 14,970 12,440 19,770 12,313 14,416 12,861 13,9499. Federal Income Tax……………………… 10,151 10,151 10,151 10,151 10,151 10,119 10,151 10,151 10,151 10,151

10. Net Federal GST………………………… 1,132 1,188 1,102 1,022 1,065 943 1,022 997 1,035 97611. Total Tax………………………………… 19,155 19,765 22,496 26,143 23,656 30,833 23,486 25,565 24,046 25,076

Senior Couple with Equal Pension Incomes - $30,000

1. Provincial Income Tax…………………… 0 0 -592 -1,109 -1,604 -1,236 0 -237 0 -1,2002. Property Tax - Gross………………….. 3,011 2,904 3,302 3,190 3,924 3,798 2,947 2,795 2,959 2,283

- Net…………………….. 2,166 2,904 3,302 3,190 3,924 3,798 2,947 2,795 2,959 2,2833. Sales Tax………………………………… 867 0 804 1,151 864 1,693 1,069 1,657 1,271 1,2634. Fuel Tax…………………………………… 145 130 150 140 223 292 247 247 223 3465. Net Carbon Tax ………………………… -57 -111 -- -- -- -- -- -- -- --6. Provincial Direct Taxes………………… 3,121 2,923 3,664 3,372 3,407 4,547 4,264 4,463 4,453 2,6917. Health Care Premiums/Payroll Tax…… 0 -- -- - - - -- -- -- - 8. Total Provincial Tax……………………… 3,121 2,923 3,664 3,372 3,407 4,547 4,264 4,463 4,453 2,6919. Federal Income Tax……………………… 0 0 0 0 0 0 0 0 0 0

10. Net Federal GST………………………… 322 348 317 325 320 281 288 282 296 34111. Total Tax………………………………… 3,443 3,271 3,981 3,696 3,727 4,828 4,552 4,745 4,750 3,032

Personal Income Tax•

Net Child Benefits•

Property Tax•

Sales, Fuel and Carbon Tax Estimates•

•

•

Health Care Premiums/Payroll Tax•

Effective Tax Rates•

Carbon tax applies in British Columbia to household consumption of gasoline, natural gas and home heating fuel. Estimated carbon tax liabilities are based on natural gas and home heating fuel consumption amounts from the Survey of Household Spending and the assumed fuel consumption noted above. Net carbon tax is estimated as carbon tax liabilities less the low income climate action tax credit where applicable. Alberta implemented a carbon levy in 2017. The price is currently set at $20 per tonne of carbon dioxide equivalent emissions but will increase to $30 per tonne in 2018. Assumptions regarding natural gas and fuel consumption in Alberta are taken from Alberta Treasury Board and Finance.

A separate health care premium is levied in British Columbia. Payroll taxes, in the four provinces that levy them, are paid by the employer. Employer-paid payroll taxes and employer-paid health care premiums are generally reflected in reduced wages.

British Columbia taxes have been calculated using rates in effect for 2017. Taxes for other provinces were calculated using rates that were announced prior to February 1, 2017, and that come into effect during 2017.

Income tax is based on basic personal credits, applicable credits and typical major deductions at each income level. Quebec residents pay federal income tax less an abatement of 16.5 per cent of basic federal tax. This abatement has been used to reduce Quebec provincial tax rather than federal tax, for comparative purposes. The two income family of four with $60,000 annual income is assumed to have one spouse earning $40,000 and the other $20,000, the family with $90,000 income is assumed to have one spouse earning $50,000 and the other $40,000, the family with $30,000 is assumed to have each spouse earning $15,000 and each senior is assumed to receive $15,000. All representative families are assumed to have employment income except the senior couple.

Net child benefits are provincial measures affecting payments to families with children. Provincial child benefit measures are available in British Columbia (BC Early Childhood Tax Benefit), Alberta (Alberta Child Benefit, Family Employment Credit), Ontario (Child Benefit), Quebec (Child Assistance Payments), New Brunswick (Child Tax Benefit), Nova Scotia (Child Benefit) and Newfoundland and Labrador (Child Benefit).

It is assumed that the family at $30,000 and the individual at $25,000 rent accommodation, the family at $60,000 and the senior couple own bungalows, the family at $90,000 owns a two-storey executive-style home, and the individual at $80,000 owns a luxury condominium in a major city for each province. Net local and provincial property taxes are estimated as taxes owing, after credits provided through the property tax system are subtracted.

Includes sales tax on meals, liquor and accommodation. Estimates are based on expenditure patterns from the Survey of Household Spending. In estimating individual and family taxable consumption, disposable income is reduced by 20 per cent to reflect housing (mortgage and property taxes or rent) costs. The senior couple is assumed to own their home and have no mortgage costs. For each province, disposable income is further reduced by estimated federal income taxes, estimated provincial income taxes and health care premiums/payroll taxes if applicable. In addition, the single individual with $80,000 annual income and the family with $90,000 annual income are assumed to have savings equal to 5 per cent of their disposable income. For each family, disposable income is distributed among expenditures using the consumption pattern of a typical family with the relevant characteristics as estimated using family expenditure data, and the relevant sales tax component is extracted. Sales tax includes: provincial retail sales taxes in British Columbia, Saskatchewan, and Manitoba; Quebec's value added tax; the provincial component of the HST in Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and Alberta's Tourism Levy. Sales tax estimates have been reduced by sales tax credits where applicable.

Fuel tax is based on annual consumption: 1,000 litres of unleaded fuel for the individual at $25,000, the family at $30,000 and the senior couple; others are assumed to consume 1,500 litres.

New-foundland

and Labrador

Ontario Quebec New Brunswick

Nova Scotia

Prince Edward IslandTax

British Columbia Alberta Saskat-chewan Manitoba

Budget 2017 Update – 2017/18 to 2019/20

Appendix 111

Table A4 Interprovincial Comparisons of Provincial Personal Income Taxes Payable 1 – 2017 (Rates known as of August 15, 2017)

Annual provincial taxes payable 3 ($)

$10,000……………… 0 0 0 0 0 0 0 0 0 0$20,000……………… 3 17 300 1,007 408 267 331 862 848 142$30,000……………… 831 951 1,304 2,044 1,210 1,636 1,536 1,758 1,964 1,672$40,000……………… 1,412 1,885 2,309 3,220 1,832 3,127 2,676 3,196 3,200 2,726$50,000……………… 2,149 2,819 3,408 4,424 2,774 4,801 4,040 4,633 4,516 4,118$60,000……………… 2,905 3,791 4,653 5,668 3,674 6,470 5,495 6,117 5,868 5,544$70,000……………… 3,675 4,791 5,928 7,036 4,589 8,132 6,977 7,784 7,423 6,994$80,000……………… 4,506 5,791 7,203 8,776 5,724 9,793 8,459 9,451 9,093 8,552$100,000……………… 6,797 7,791 9,753 12,256 8,734 13,581 11,727 12,843 12,433 11,712$125,000……………… 10,269 10,291 12,940 16,606 13,087 18,857 15,857 17,218 17,018 15,662$150,000……………… 13,944 13,258 16,544 20,956 17,439 24,185 20,204 21,593 21,611 19,941

Provincial personal income taxes as a per cent of taxable income (%)$10,000……………… 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0$20,000……………… 0.0 0.1 1.5 5.0 2.0 1.3 1.7 4.3 4.2 0.7$30,000……………… 2.8 3.2 4.3 6.8 4.0 5.5 5.1 5.9 6.5 5.6$40,000……………… 3.5 4.7 5.8 8.0 4.6 7.8 6.7 8.0 8.0 6.8$50,000……………… 4.3 5.6 6.8 8.8 5.5 9.6 8.1 9.3 9.0 8.2$60,000……………… 4.8 6.3 7.8 9.4 6.1 10.8 9.2 10.2 9.8 9.2$70,000……………… 5.2 6.8 8.5 10.1 6.6 11.6 10.0 11.1 10.6 10.0$80,000……………… 5.6 7.2 9.0 11.0 7.2 12.2 10.6 11.8 11.4 10.7$100,000……………… 6.8 7.8 9.8 12.3 8.7 13.6 11.7 12.8 12.4 11.7$125,000……………… 8.2 8.2 10.4 13.3 10.5 15.1 12.7 13.8 13.6 12.5$150,000……………… 9.3 8.8 11.0 14.0 11.6 16.1 13.5 14.4 14.4 13.3

1

2

3 Includes provincial low income reductions, surtaxes payable in Ontario and Prince Edward Island, and the Ontario Health Premium tax. Excludes credits for sales and property tax credits.

Nova Scotia


New-foundland

and Labrador

Calculated for a single individual with wage income and claiming credits for Canada Pension Plan and Quebec Pension Plan contributions, Employment Insurance premiums, Quebec Parental Insurance Plan premiums, and the basic personal amount.

Manitoba Ontario Quebec 2New

BrunswickTaxable income British

Columbia Alberta Saskat-chewan

Quebec residents pay federal tax less an abatement of 16.5 per cent of federal tax. In the table, the Quebec abatement has been used to reduce Quebec provincial personal income tax for comparative purposes.

112 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A5 Material Assumptions – Revenue

Revenue Source and Assumptions($ millions unless otherwise specified) 2017/18 Sensitivities

Personal income tax * $9,053 $9,885 $10,341Current calendar year assumptions

Household income growth ........................................... 4.1% 4.0% 3.9% +/- 1 percentage point change inCompensation of employees growth ........................... 4.7% 4.2% 4.0% 2017 BC household income growthTax base growth .......................................................... 4.3% 4.1% 3.9% equals +/- $100 to $110 millionAverage tax yield ......................................................... 5.39% 5.59% 5.64%Current-year tax ........................................................... $8,770 $9,486 $9,934Prior year's tax assessments ...................................... $430 $440 $450Unapplied taxes ........................................................... $90 $90 $90BC Tax Reduction ....................................................... -$159 -$162 -$165Non-refundable BC tax credits .................................... -$96 -$91 -$91Policy neutral elasticity ** ............................................ 1.3 1.2 1.2 +/- 0.5 change in 2017 BC

Fiscal year assumptions policy neutral elasticityPrior-year adjustment .................................................. -$173 equals +/- $150 to $170 million

2016 Tax-yearHousehold income growth ........................................... 3.8% +/- 1 percentage point change in 2016Tax base growth .......................................................... 2.0% BC household or taxable incomeAverage 2016 tax yield ................................................ 3.34% growth equals +/- $100 to $1102016 tax ....................................................................... $8,340 million one-time effect2015 & prior year's tax assessments .......................... $420 (prior-year adjustment)Unapplied taxes ........................................................... $90 and could result in an BC Tax Reduction ....................................................... -$156 additional +/-$80 to $100 millionNon-refundable BC tax credits .................................... -$95 base change in 2017/18Policy neutral elasticity **............................................. 0.8

* Reflects information as at August 25, 2017** Ratio of annual per cent change in current-year revenue to annual per cent change in personal income (calendar year).

Corporate income tax * $4,303 $4,112 $4,135Components of revenue (fiscal year)

Instalments - subject to general rate ……………… $3,430 $3,679 $3,798Instalments - subject to small business rate $301 $307 $317Non-refundable BC tax credits .................................... -$110 -$116 -$122Advance instalments ................................................... $3,621 $3,870 $3,993International Business Activity Act refunds ................. -$20 -$15 -$10Prior-year settlement payment .................................... $702 $257 $152

Current calendar year assumptionsNational tax base ($ billions) ....................................... $340.7 $341.7 $349.5 +/- 1% change in the 2017BC instalment share of national tax base .................... 12.5% 13.3% 13.4% national tax base equalsEffective tax rates (general/small business) ................ 11.0 / 2.1 12.0 / 2.0 12.0 / 2.0 +/- $20 to $40 million Share of the BC tax base subject to small business rate……………………………….…… 33.4% 33.4% 33.4% +/- 1 percentage point change in theBC tax base growth (post federal measures)............... 9.0% 2.1% 3.0% 2017 small business share equalsBC net operating surplus growth ................................. 9.1% 2.8% 2.8% -/+ $30 to $40 million

2016 Tax-year +/- 1% change in the 2016BC tax base growth (post federal measures)............... 15.9% BC tax base equals +/- $30BC net operating surplus growth ................................. 11.2% to $50 million in 2017/18Gross 2016 tax ............................................................ $3,460 Prior-year settlement payment .................................... $702 Prior years losses/gains (included in above) ............... -$20 Non-refundable BC tax credits .................................... -$102

* Reflects information as at August 25, 2017

Net cash received from the federal government and cash refunds under the International Business Activity Act are used as the basis for estimating revenue. Due to lags in the federal collection and instalment systems, changes to the BC net operating surplus and tax base forecasts affect revenue inthe succeeding year. The 2017/18 instalments from the federal government reflects two-third of payments related to the 2017 tax year (paid during Apr-July 2017 and adjusted in Sept and Dec) and one-third of 2018 payments. Instalments for the 2017 (2018) tax year are based on BC's share of the national tax base for the 2015 (2016) tax year and a forecast of the 2017 (2018) national tax base. BC's share of the 2015 national tax base was 12.53%, based on tax assessments as of December 31, 2016. Cash adjustments for any under/over payments from the federal government in respect of 2016 will be received/paid on March 29, 2018.

2016 Assumptions

Plan 2019/20

Plan 2018/19


2016 Assumptions

Budget 2017 Update – 2017/18 to 2019/20

Appendix 113

Table A5 Material Assumptions – Revenue (continued )


Provincial sales tax $7,042 $7,270 $7,492Provincial sales tax base growth (fiscal year) …………… 5.3% 4.4% 4.2% +/- 1 percentage point change in theCalendar Year nominal expenditure 2017 consumer expenditure growth

Durable goods ………………………………………….. 6.3% 2.5% 1.9% equals up to +/- $30 millionConsumer goods and services..................................... 5.8% 4.9% 4.6%Business investment ……………………………………… 5.4% 5.6% 4.9%Other ……………………………………………………… 6.2% 3.4% 3.9%

Components of Provincial sales tax revenue +/- 1 percentage point change in theConsolidated Revenue Fund........................................ $7,033 $7,261 $7,483 2017 business investment growthBC Transportation Financing Authority ........................ $9 $9 $9 equals up to +/- $15 million

Fuel and carbon taxes $2,203 $2,444 $2,686Calendar Year

Real GDP .................................................................... 2.9% 2.1% 2.0%Gasoline volumes ........................................................ 0.0% 0.0% 0.0%Diesel volumes ............................................................ 2.0% 2.0% 2.0%Natural gas volumes .................................................... 2.9% 2.1% 2.0%

Carbon tax rates (April 1)Carbon dioxide equivalent emissions ($/tonne)............ $30 $35 $40Natural gas (cents/gigajoule) …………………………… 148.98¢ 173.81¢ 198.64¢Gasoline (cents/litre) ………………………………………6 6.67¢ 7.78¢ 8.89¢Light fuel oil (cents/litre) …………………………………6 7.67¢ 8.95¢ 10.23¢

Components of revenueConsolidated Revenue Fund ................................... $505 $509 $513BC Transit ................................................................ $12 $12 $12BC Transportation Financing Authority .................... $458 $461 $464

$975 $982 $989

Carbon tax revenue ………………………………. $1,228 $1,462 $1,697

Property taxes $2,384 $2,503 $2,621Calendar Year

Consumer Price Index ................................................. 2.1% 2.1% 2.0% +/- 1 percentage point change inHousing starts (units).................................................... 38,300 30,328 27,021 2017 new construction & inflation

Home owner grants (fiscal year) .................................... $808 $821 $833 growth equals up to +/- $20 million in Components of revenue residential property taxation revenue

Residential (net of home owner grants) ....................... $856 $889 $923Non-residential ............................................................ $1,222 $1,288 $1,358 +/- 1% change in 2017 total Rural area .................................................................... $96 $99 $103 business property assessment Police ........................................................................... $33 $32 $32 value equals up to +/- $20 millionBC Assessment Authority ............................................ $90 $92 $96 in non-residential propertyBC Transit .................................................................... $87 $103 $109 taxation revenue

Other taxes $3,195 $3,078 $3,002Calendar Year

Population .................................................................... 1.2% 1.2% 1.2%Consumer Price Index ................................................. 2.1% 2.1% 2.0%Housing starts .............................................................. -8.5% -20.8% -10.9%Real GDP .................................................................... 2.9% 2.1% 2.0%Nominal GDP ............................................................... 5.1% 4.1% 4.0%

Components of revenue +/- 5% change to 2017 housing Property transfer .......................................................... $1,875 $1,731 $1,640 starts equals +/- $40 to 60 million15% additional tax (included in above) ...................... $200 $200 $200 in property transfer revenue,Tobacco ....................................................................... $745 $762 $762 depending on property valuesInsurance premium ...................................................... $575 $585 $600


Plan 2018/19

Plan 2019/20

114 Appendix

Budget 2017 Update – 2017/18 to 2019/20



Energy, sales of Crown land tenures,metals, minerals and other * $1,056 $926 $885

Natural gas price +/- $0.25 change in the natural gasPlant inlet, $C/gigajoule ………………………………… $1.60 $1.68 $1.78 price equals +/- $60 to $70 million,Sumas, $US/MMBtu …………………………………… $2.38 $2.48 $2.60 including impacts on production

Natural gas production volumes volumes and royalty programBillions of cubic metres ................................................ 51.1 58.8 64.9 credits, but excluding anyPetajoules .................................................................... 2,102 2,419 2,671 changes from natural gas liquidsAnnual per cent change ………………………………… 11.3% 15.1% 10.4% revenue (e.g. butane, pentanes)

Sensitivities can also varyOil price ($US/bbl at Cushing, OK) ……………………… $51.04 $55.43 $61.04 significantly at different price levels

+/- 1% change in natural gasAuctioned land base (000 hectares) ……………………… 63 40 40 volumes equals +/- $2 millionAverage bid price/hectare ($) ……………………………… $1,956 $160 $200 on natural gas royaltiesCash sales of Crown land tenures ………………………… $122 $6 $8 +/- 1 cent change in the Metallurgical coal price ($US/tonne, fob West Coast) ……… $145 $120 $116 exchange rate equals +/- $1 million Copper price ($US/lb) .................................................... $2.56 $2.60 $2.72 on natural gas royalties

Annual electricity volumes set by treaty ………………… 4.0 4.0 4.0 +/- US$20 change in the average (million mega-watt hours) metallurgical coal price

Mid-Columbia electricity price …………………………… $24 $24 $25 equals +/- $40 to $50 million($US/mega-watt hour) +/- 10% change in the average

Mid-Columbia electricity priceExchange rate (US¢/C$, calendar year) ……………… 76.3 77.3 78.8 equals +/- $13 millionComponents of revenue

Bonus bid auctions: Based on a recommendation Deferred revenue…………………………………… $305 $219 $129 from the Auditor General to be Current-year cash (one-ninth)…..………………… $14 $1 $1 consistent with generally

Fees and rentals………..…….…..…………………… $52 $52 $52 accepted accounting principles, Total bonus bids, fees and rentals ……………………… $371 $272 $182 bonus bid revenue recognition Natural gas royalties…………………………………….. $237 $307 $357 reflects nine-year deferral of Petroleum royalties ……………………………………… $62 $68 $72 cash receipts from the sale of Columbia River Treaty electricity sales ………………… $107 $106 $107 Crown land tenuresOil and Gas Commission fees and levies ……………… $50 $49 $50Coal, metals and other minerals revenue: Coal mineral tax…………….……...…………………… $183 $63 $52 Net metals and other minerals tax…….…..…………… $13 $26 $22 Recoveries related to metal mines …………………… $11 $12 $20 Coal tenures ..………..………………………………… $8 $8 $8 Miscellaneous mining revenue ………………………… $14 $15 $15Total coal, metals and other minerals revenue $229 $124 $117

Royalty programs and infrastructure creditsDeep drilling ……………………………………………… -$341 -$399 -$500Road and pipeline infrastructure ………………………… -$43 -$52 -$69Total ………………………………………………………… -$384 -$451 -$569

Implicit average natural gas royalty rate ………………… 7.0% 7.6% 7.5%

Royalty program (marginal, low productivity and ultra marginal drilling) adjustments reflect reduced royalty rates.Natural gas royalties incorporate royalty programs and Treasury Board approved infrastructure credits.* Reflects information as at August 3, 2017.


Plan 2018/19

Plan 2019/20

Budget 2017 Update – 2017/18 to 2019/20

Appendix 115



Forests * $890 $846 $843Prices (calendar year average) +/- US$50 change in SPF

SPF 2x4 ($US/thousand board feet) …………………… $377 $360 $340 price equals +/- $75 to $100 millionRandom Lengths Composite ($US/thousand board feet) ........................................ $400 $385 $365 +/- US$50 change in pulp pricePulp ($US/tonne) ………………………………………… $858 $835 $803 equals +/-$5 to $10 millionCoastal log ($Cdn/cubic metre); +/- Cdn$10 change in average Vancouver Log Market ………………………………… $143 $130 $120 log price equals +/-$15 to

$25 millionCrown harvest volumes (million cubic metres)

Interior ……………………………………………………… 44.8 45.5 45.3 +/- 10% change in InteriorCoast ……………………………………………………… 13.2 13.5 13.7 harvest volumes equalsTotal ………………………………………………………… 58.0 59.0 59.0 +/- $50 to $70 millionBC Timber Sales (included in above) …………………… 11.8 11.4 11.2 +/- 10% change in Coastal

harvest volumes equalsStumpage rates ($Cdn/cubic metre) +/- $15 to $20 million

Total stumpage rates …………………………………… $13.78 $12.83 $12.80 +/- 1 cent change in Components of revenue exchange rate equals

Tenures …………………………………………………… $509 $479 $485 +/- $10 to $15 million on BC Timber Sales ………………………………………… $312 $300 $292 stumpage revenueLogging tax ………………………………………………… $28 $28 $28Other CRF revenue ……………………………………… $21 $20 $20 The above sensitivities relateRecoveries………………………………………………… $20 $19 $18 to stumpage revenue only.

* Reflects information as at August 3, 2017.Other natural resources $467 $478 $482

Components of revenueWater rental and licences* ……………………………… $394 $410 $414Recoveries ………………………………………………… $48 $43 $43Angling and hunting permits and licences ……………… $11 $11 $11Recoveries ………………………………………………… $14 $14 $14* Water rentals for power purposes are indexed to Consumer Price Index.

Other revenue $10,483 $9,502 $9,574Components of revenue

Fees and licences Medical Services Plan (MSP) premiums …………… $2,248 $1,345 $1,361 +/- 1 percentage point change in BC's

Consolidated Revenue Fund ................................ $2,184 $1,281 $1,297 population growth equalsMSP recoveries .................................................... $64 $64 $64 +/- $20 to $30 million in MSP

Motor vehicle licences and permits ………………… $535 $542 $550 premium revenue Other Consolidated Revenue Fund ......................... $446 $417 $418

Summary consolidation eliminations......................... -$14 -$15 -$15 Other recoveries ...................................................... $107 $106 $106

Crown corporations and agencies ........................... $122 $123 $90Post-secondary education fees ……………………… $1,949 $2,027 $2,096Other healthcare-related fees ………………………… $390 $389 $390School Districts ........................................................ $279 $295 $311

Investment earningsConsolidated Revenue Fund ................................... $113 $120 $130Fiscal agency loans & sinking funds earnings.......... $938 $932 $938Summary consolidation eliminations......................... -$88 -$87 -$93Crown corporations and agencies............................ $29 $25 $28SUCH sector agencies ............................................. $191 $194 $197

Sales of goods and services …………………………… $1,032 $1,053 $1,068Miscellaneous .............................................................. $2,206 $2,036 $1,999


Plan 2018/19

Plan 2019/20

116 Appendix

Budget 2017 Update – 2017/18 to 2019/20



Health and social transfers $6,672 $6,902 $7,164National Cash Transfers Canada Health Transfer (CHT) ................................ $37,150 $38,423 $39,917

Annual growth ....................................................... 3.0% 3.4% 3.9% Canada Social Transfer (CST) ................................. $13,748 $14,161 $14,586BC share of national population (June 1) ……………… 13.11% 13.13% 13.14% +/- 0.1 percentage point change in

BC's population share equalsBC health and social transfers revenue +/- $50 million CHT .......................................................................... $4,870 $5,043 $5,247 CST .......................................................................... $1,802 $1,859 $1,917 Prior-year adjustments —

Other federal contributions $1,700 $1,663 $1,574Components of revenue

Disaster Financial Assistance ...................................... $18 $20 $8Other Consolidated Revenue Fund ............................. $138 $138 $139Vote Recoveries: Labour Market Development Agreement ................. $299 $298 $298 Labour Market and Skills Training Program ............ $65 $65 $65 Home Care……………………………………………… $26 $78 $85 Mental Health…………………………………………… $13 $33 $59 Opioid crisis……………………………………………… $10 — — Family Support and Children in Care ...................... $49 $49 $49 Youth Justice Services ............................................ $18 $18 $18 Emergency Management ........................................ $11 $11 $11 Local government services and transfers ................ $71 $1 $1 Other recoveries....................................................... $128 $178 $92Crown corporations and agencies ............................... $301 $218 $186Post-secondary institutions .......................................... $458 $466 $473Other SUCH sector agencies....................................... $95 $90 $90

Service delivery agency directrevenue $6,834 $6,898 $6,910

School districts ……………………………………………… $648 $684 $692Post-secondary institutions ………………………………… $3,663 $3,766 $3,865Health authorities and hospital societies ………………… $888 $893 $895BC Transportation Financing Authority …………………… $561 $580 $570Other service delivery agencies ..................................... $1,074 $975 $888

Commercial Crown corporation net income $2,959 $2,948 $2,878

BC Hydro …………………………………………………… $698 $712 $712reservoir water inflows ……………………………………9 105% 100% 100% +/-1% in hydro generation

= +/-$5 millionmean gas price …………………………………………… 2.68 2.39 2.21 +/-10% = -/+$1 million (Sumas, $US/MMbtu – BC Hydro forecast based on NYMEX forward selling prices)electricity prices ........…………………………............... 20.89 21.49 22.06 +/-10% change in electricity trade (Mid-C, $US/MWh) margins = +/-$15 million

ICBC …………………………………………………...…… ($225) ($302) ($411)vehicle growth .............................................................. +2.0% +1.8% +1.8% +/-1% = +/-$53 millioncurrent claims cost percentage change .......................8 +2.3% +11.3% +10.1% +/-1% = -/+$47 millionunpaid claims balance ($ billions) ................................0 $11.1 $11.9 $13.0 +/-1% = -/+$105 to $111 millioninvestment return …………………………………………0 3.2% 2.8% 2.7% +/-1% return = +/-$155 to $160 millionloss ratio ...................................................................... 95.0% 96.5% 97.1%


Plan 2018/19

Plan 2019/20

Budget 2017 Update – 2017/18 to 2019/20

Appendix 117

Table A6 Natural Gas Price Forecasts – 2017/18 to 2019/20

2017 2018 2019 2017/18 2018/19 2019/20

GLJ Henry Hub US$/MMBtu (July 1, 2017) ……………………………………… 3.15 3.20 3.30 2.24 2.44 2.52Sproule Henry Hub US$/MMBtu (June 30, 2017) ……………………………… 3.30 3.50 3.50 2.44 2.78 2.87McDaniel Henry Hub US$/MMBtu (July 1, 2017) ……………………………… 3.08 3.05 3.20 2.15 2.28 2.38Deloitte Henry Hub US$/Mcf (July 5, 2017) ……………………………………… 3.10 3.20 3.35 2.11 2.32 2.42GLJ Alberta AECO-C Spot C$/MMBtu (July 1, 2017) …………………………… 2.79 2.93 3.05 1.62 1.71 1.84Sproule Alberta AECO-C Spot C$/MMBtu (June 30, 2017) …………………… 3.00 3.39 3.27 1.84 2.08 2.15McDaniel AECO-C Spot C$/MMBtu (July 1, 2017) ……………………………… 2.78 2.85 3.05 1.60 1.66 1.85Deloitte AECO-C Spot C$/Mcf (July 5, 2017) …………………………………… 2.40 2.70 2.85 1.32 1.41 1.57GLJ Sumas Spot US$/MMBtu (July 1, 2017) …………………………………… 2.68 2.80 2.95 1.94 2.12 2.26Sproule Sumas Spot C$/MMBtu (June 30, 2017) ……………………………… 3.89 4.19 4.07 2.29 2.60 2.67GLJ BC Spot Plant Gate C$/MMBtu (July 1, 2017) ……………………………… 2.21 2.36 2.58 1.42 1.50 1.69Sproule BC Station 2 C$/MMBtu (May 31, 2017) ……………………………… 2.68 2.99 2.87 1.71 1.87 1.93McDaniel BC Avg Plant Gate C$MMBtu (July 1, 2017) ………………………… 2.25 2.35 2.65 1.44 1.51 1.76Deloitte BC Station 2 C$MMBtu (July 5, 2017) ………………………………… 2.00 2.30 2.45 1.26 1.34 1.49GLJ Midwest Chicago US$/MMBtu (July 1, 2017) ……………………………… 3.22 3.25 3.35 2.21 2.38 2.45Sproule Alliance Plant Gate C$/MMBtu (June 30, 2017) ……………………… 4.13 4.39 4.17 2.63 3.01 2.97EIA Henry Hub US$/MMBtu (July, 2017) ………………………………………… 3.16 3.41 – 2.37 – –TD Economics Henry Hub Futures US$/MMBtu (May 26, 2017) ……………… 3.11 3.28 – 2.24 – –Scotiabank Group Henry Hub US$/MMBtu (July 11, 2017) …………………… 3.10 2.95 – 2.13 – –BMO Alberta Empress US$/MMBtu (June 2017) ……………………………… 3.00 3.25 – 2.35 – –CIBC World Markets Inc. Henry Hub US$/MMBtu (January 20, 2017) ........... 2.95 2.80 – 1.98 – –InSite Petroleum Consultants Ltd Henry Hub US$/MMBtu (June 30, 2017) ... 3.15 3.30 3.45 2.28 2.58 2.70NYMEX Forward Market converted to Plant Inlet C$/GJ (July 12, 2017) ………………………………………… 2.13 2.09 1.84

Average all minus high/low …….……………...……………………………………………………… 1.98 2.08 2.20Average one forecast per consultant minus high/low …………………………………………… 1.94 1.62 1.79Natural gas royalty price forecast …………………………………………………………………… 1.60 1.68 1.78

GLJ: Gilbert Laustsen Jung Petroleum Consultants Ltd US EIA: US Energy Information Administration AECO: Alberta Energy Company

Deloitte/AJM: Deloitte L.L.P acquired Ashton Jenkins Mann Petroleum Consultants McDaniel: McDaniel & Associates Consultants Ltd

Adjusted to fiscal years and $C/gigajoule at plant inlet Private sector forecasts (calendar year)

Natural Gas Prices

0

1

2

3

4

5

6

7

8

9

10

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$1.68 $1.78$1.60

Cdn$/gigajoule, plant inlet

Natural gas prices

May/16: $0.33

June/08: $9.34

Budget 2017 Update

118 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A7 Material Assumptions – Expense

Ministry Programs and Assumptions($ millions unless otherwise specified) Sensitivities 2017/18Advanced Education, Skills and Training …… 2,154 2,170 2,214

Student spaces in public institutions …………… 200,974 201,244 202,509

Attorney General …………………………………… 534 540 541New cases filed/processed ……………………… 240,000 240,000 240,000(# for all courts)

Crown Proceeding Act (CPA) …………………… 25 25 25

Children and Family Development ……………… 1,596 1,592 1,595Average children-in-care ………………………… 6,960 6,910 6,910

caseload (#)Average annual residential ……………………… 50,900 52,500 52,500

cost per child in care ($)

Education …………………………………………… 6,100 6,206 6,237

Public School Enrolment (# of FTEs) …………… 553,435 556,901 560,957 School age (K–12) ........................................... 531,251 534,717 538,772 Distributed Learning (online) ........................... 12,004 12,004 12,004 Summer ........................................................... 6,865 6,865 6,865 Adults .............................................................. 3,315 3,315 3,315

Forests, Lands, Natural Resource Operations and Rural Development ………… 1,149 699 701

BC Timber Sales …………………………….…… 183 181 183

Fire Management ………………………………… 506 64 64

Health .................................................................. 18,897 19,566 20,234Pharmacare ………………………………………… 1,226 1,261 1,300

Medical Services Plan (MSP) …………………… 4,570 4,774 4,869

Regional Services ………………………………… 12,826 13,253 13,785


Plan 2019/20

A 1% increase in the cost per case or a 1% increase in the average funded caseload will affect expenditures by approximately $2 million (excluding Delegated Aboriginal Agencies).

Student enrollment may fluctuate due to a number of factors including economic changes and labour market needs.

Plan 2018/19

Enrolment forecasts are based on the ministry’s enrolment forecasting model. Enrolment changes from year to year are projected based on changes in four enrolment drivers: migration, demographics, student transition from independent to public schools, and student retention rates in the public school system.

The number of criminal cases proceeded on by the provincial and federal Crown (including appeals to higher courts in BC), the number of civil and family litigation cases, the number of violation tickets disputed, and the number of municipal bylaw tickets disputes which would go to court for resolution.

The number of new cases, and the difference between estimated settlements and actual settlements.

Targets can be impacted by changes to actual inventory costs incurred. There is a lag of approximately 1.5 years between when inventory costs are incurred and when they are expensed. Volume harvested can also impact targets. For example, if volume harvested is less than projected in any year, then capitalized expenses will also be reduced in that year.

A 1% change in utilization or prices affects costs by approximately $10 million.

A 1% increase in volume of services provided by fee-for-service physicians affects costs by approximately $25 million.

For authorized expenditures under the Wildfire Act . Record fire season to date. Over the past several years, Fire Management fighting costs have ranged from a low of $47 million in 2006 to a high of $382 million in 2010.

Budget 2017 Update – 2017/18 to 2019/20

Appendix 119

Table A7 Material Assumptions – Expense (continued)

Ministry Programs and Assumptions($ millions unless otherwise specified) Sensitivities 2017/18Public Safety and Solicitor General .................. 1,030 798 798

Policing, Victim Services and Corrections ......... 711 702 702

Emergency Program Act (EPA) ………………… 238 15 15

Social Development and PovertyReduction ………………………………………… 3,105 3,268 3,315

Temporary Assistance ………………………….… 43,500 43,300 42,400annual average caseload (#)

Disability Assistance ……………………………… 102,700 106,100 108,700annual average caseload (#)

Adult Community Living:

Developmental Disabilities ProgramsAverage caseload (#) …………………………… 19,050 19,920 20,760

Average cost per client ($) ……………………… 45,200 44,900 43,700Personal Supports Initiative

Average caseload (#) …………………………… 1,580 1,860 2,160Average cost per client ($) ……………………… 17,100 16,400 15,900

The caseload for persons with disabilities is sensitive to the aging of the population and longer life expectancy for individuals with disabilities. Cost per case fluctuations are driven primarily by earnings exemptions, which is dependent on the level of income earned by clients.


Plan 2018/19

Plan 2019/20

The volume and severity of criminal activity, the number of inmate beds occupied and the number of offenders under community supervision. In 2017/18, one-time lump sum payments will be made to provincial RCMP officers for retroactive salary increases announced by the federal government in April 2017.

The expected to work caseload is sensitive to fluctuations in economic and employment trends. Costs are driven by changes in the cost per case and caseload. Cost per case fluctuations result from changes in the needed supports required by clients, as well as caseload composition.

The adult community living caseload is sensitive to an aging population and to the level of service required. Cost per case fluctuations are driven by the proportion of clients receiving certain types of services at differing costs. For example, residential care is significantly more costly than day programs.

For authorized expenditures under the EPA, including those for further disasters, and the difference between initial estimates for disaster response and recovery costs and final project costs. In 2017/18, the projected EPA expenditures are based on forecasts as of June 30, 2017.

120 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A7 Material Assumptions – Expense (continued)

Ministry Programs and Assumptions($ millions unless otherwise specified) Sensitivities 2017/18Tax Transfers ……………………………………… 1,166 1,226 1,247

Individuals .......................................................... 489.0 529.0 529.0

Low Income Climate Action ............................. 195.0 235.0 235.0 These tax transfers are now expensed as Early Childhood Tax Benefit ............................ 145.0 145.0 145.0 required under generally accepted accountingSales Tax ....................................................... 55.0 55.0 55.0 principles. Small Business Venture Capital ...................... 31.0 31.0 31.0BC Senior's Home Renovation ........................ 2.0 2.0 2.0 Changes in 2016 tax transfers will result in Other tax transfers to individuals .................... 60.8 60.8 60.8 one-time effect (prior-year adjustment) and Family Bonus Program..................................... 0.2 0.2 0.2 could result in an additional base change

Corporations ...................................................... 677.0 697.0 718.0 in 2017/18. Production services tax credit is Film and Television ......................................... 90.0 90.0 90.0 the most volatile of all tax transfers and is Production Services ........................................ 404.0 421.3 438.3 influenced by several factors including delay Scientific Research & Experimental in filing returns and assessment of claims, Development ................................................. 68.0 72.0 76.0 length of projects and changes in theInteractive Digital Media .................................. 59.0 59.0 59.0 exchange rates.Mining Exploration ........................................... 42.0 42.0 42.0Other tax transfers to corporations .................. 14.0 12.7 12.7

Management of Public Funds and Debt ……… 1,250 1,318 1,291Interest rates for new provincial borrowing:

Short-term ………………………………………… 0.94% 1.44% 1.79%Long-term ………………………………………… 3.28% 3.93% 4.36%

CDN/US exchange rate (cents) ………………… 130.5 128.6 126.4

Service delivery agency net spending ………… 6,507 6,445 6,977

School districts …………………………………… 297 227 285Post-secondary institutions ……………………… 3,226 3,462 3,613Health authorities and hospital societies ……… 687 581 708BC Transportation Financing Authority ………… 1,354 1,370 1,482Other service delivery agencies ………………… 943 805 889


Plan 2018/19

Plan 2019/20

Full year impact on MoPD on interest costs of a 1% change in interest rates equals $34.2 million; $100 million increase in debt level equals $2.7 million.

Budget 2017 Update – 2017/18 to 2019/20

Appendix

121

Table A8 Operating Statement – 2010/11 to 2019/20

($ millions) Actual 2010/11

Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17

BudgetEstimate2017/18

Plan 2018/19

Plan 2019/20

Average annual change

(per cent)Revenue ………………………………………… 40,680 41,805 42,057 43,717 46,103 47,602 51,459 52,407 52,557 53,677 3.1Expense …………….....…....………………..… (40,926) (42,047) (43,204) (43,401) (44,439) (46,791) (48,722) (51,861) (52,029) (53,070) 2.9

Surplus (deficit) before unusual items ………… (246) (242) (1,147) 316 1,664 811 2,737 546 528 607 Forecast allowance ……………………………… - - - - - - - (300) (300) (350) Liability for HST transition funding repayment - (1,599) - - - - - - - -

Surplus (deficit) …………………………………… (246) (1,841) (1,147) 316 1,664 811 2,737 246 228 257

Per cent of GDP: 1

Surplus (deficit) .......................………………… -0.1 -0.8 -0.5 0.1 0.7 0.3 1.0 0.1 0.1 0.1Per cent of revenue:

Surplus (deficit) .......................………………… -0.6 -4.4 -2.7 0.7 3.6 1.7 5.3 0.5 0.4 0.5Per capita ($): 2

Surplus (deficit) .......................………………… (55) (409) (252) 69 358 173 576 51 47 52

1

2Surplus (deficit) as a per cent of GDP is calculated using GDP for the calendar year ending in the fiscal year (e.g. 2017/18 amounts divided by GDP for the 2017 calendar year).

Per capita revenue and expense is calculated using July 1 population (e.g. 2017/18 amounts divided by population on July 1, 2017).

122 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A9 Revenue by Source – 2010/11 to 2019/20


Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Taxation revenue: (per cent)Personal income ………………………………… 5,805 6,427 6,977 6,862 8,076 8,380 9,704 9,053 9,885 10,341 6.6Corporate income ……………………………… 2,026 2,002 2,204 2,427 2,635 2,787 3,003 4,303 4,112 4,135 8.2Sales ……………………………………………. 5,614 5,930 6,068 5,303 5,762 5,990 6,606 7,042 7,270 7,492 3.3Fuel ……………………………………………… 940 928 890 917 932 973 969 975 982 989 0.6Carbon …………………………………………… 741 959 1,120 1,222 1,198 1,190 1,220 1,228 1,462 1,697 9.6Tobacco …………………………………………… 735 636 614 724 752 734 737 745 762 762 0.4Property …………………………………………… 1,920 1,913 1,985 2,080 2,154 2,219 2,279 2,384 2,503 2,621 3.5Property transfer ………………………………… 855 944 758 937 1,065 1,533 2,026 1,875 1,731 1,640 7.5Corporation capital ……………………………… (3) (5) 1 - (1) - - - - - n/a Insurance premium ……………………………… 399 411 433 458 483 520 549 575 585 600 4.6

19,032 20,145 21,050 20,930 23,056 24,326 27,093 28,180 29,292 30,277 5.3Natural resource revenue:

Natural gas royalties …………………………… 313 339 169 445 493 139 152 237 307 357 1.5Bonus bids, rents on drilling rights and leases 923 928 868 859 834 765 633 371 272 182 -16.5Columbia River Treaty ………………………… 136 110 89 170 130 116 111 107 106 107 -2.6Other energy and minerals ……………………… 514 529 306 269 267 226 403 341 241 239 -8.2Forests …………………………………………… 436 482 562 719 754 865 913 890 846 843 7.6Other resources ………………………………… 406 424 479 493 459 460 499 467 478 482 1.9

2,728 2,812 2,473 2,955 2,937 2,571 2,711 2,413 2,250 2,210 -2.3Other revenue:

Medical Services Plan premiums ……………… 1,787 1,919 2,047 2,158 2,254 2,434 2,558 2,248 1,345 1,361 -3.0Post-secondary education fees ………………… 1,235 1,291 1,345 1,445 1,544 1,666 1,828 1,949 2,027 2,096 6.1Other health-care related fees ………………… 308 324 327 333 358 374 404 390 389 390 2.7Motor vehicle licences and permits …………… 467 479 489 504 499 521 529 535 542 550 1.8Other fees and licences ………………………… 643 722 699 770 770 841 894 940 926 910 3.9Investment earnings …………………………… 843 1,022 1,189 1,205 1,175 1,214 1,242 1,183 1,184 1,200 4.0Sales of goods and services …………………… 759 930 942 946 967 1,011 1,131 1,032 1,053 1,068 3.9Miscellaneous …………………………………… 1,929 1,746 1,673 2,256 1,893 2,287 2,377 2,206 2,036 1,999 0.4

7,971 8,433 8,711 9,617 9,460 10,348 10,963 10,483 9,502 9,574 2.1Contributions from the federal government:

Canada Health Transfer ………………………… 3,689 3,858 3,887 4,280 4,186 4,454 4,744 4,870 5,043 5,247 4.0Canada Social Transfer ………………………… 1,487 1,526 1,555 1,589 1,641 1,695 1,751 1,802 1,859 1,917 Harmonized sales tax transition payments …… 769 580 - - - - - - - - n/a Other cost shared agreements ………………… 2,064 1,760 1,605 1,645 1,452 1,498 1,672 1,700 1,663 1,574 -3.0

8,009 7,724 7,047 7,514 7,279 7,647 8,167 8,372 8,565 8,738 1.0Commercial Crown corporation net income:

BC Hydro ………………………………………… 591 558 509 549 581 655 684 698 712 712 2.1Liquor Distribution Branch ……………………… 891 909 930 877 935 1,031 1,083 1,095 1,111 1,128 2.7BC Lotteries (net of payments to federal gov't) 1,097 1,102 1,116 1,165 1,245 1,304 1,329 1,301 1,311 1,329 2.2ICBC ………………………..…………………… 315 84 231 136 657 (293) (612) (225) (302) (411) -203.0BC Railway Company …………………………… 15 14 6 13 5 6 7 5 6 7 -8.1Transportation Investment Corporation ……… (7) (17) (60) (88) (89) (80) (81) (31) - - -100.0Other ……………………………………………… 38 41 44 49 37 87 115 116 110 113 12.9

2,940 2,691 2,776 2,701 3,371 2,710 2,525 2,959 2,948 2,878 -0.2Total revenue ……………………………… 40,680 41,805 42,057 43,717 46,103 47,602 51,459 52,407 52,557 53,677 3.1

Budget 2017 Update – 2017/18 to 2019/20

Appendix

123

Table A10 Revenue by Source Supplementary Information – 2010/11 to 2019/20

Actual 2010/11

Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Per cent of nominal GDP: 1 (per cent)Taxation …………………………………………… 9.3 9.3 9.5 9.1 9.6 9.7 10.3 10.2 10.2 10.1 1.0Natural resources ………………………………… 1.3 1.3 1.1 1.3 1.2 1.0 1.0 0.9 0.8 0.7 -6.3Other ……………………………………………… 3.9 3.9 3.9 4.2 3.9 4.1 4.2 3.8 3.3 3.2 -2.1Contributions from the federal government …… 3.9 3.6 3.2 3.3 3.0 3.1 3.1 3.0 3.0 2.9 -3.2Commercial Crown corporation net income … 1.4 1.2 1.3 1.2 1.4 1.1 1.0 1.1 1.0 1.0 -4.3

Total revenue ……………………………… 19.8 19.3 19.0 19.1 19.1 19.0 19.6 19.0 18.3 17.9 -1.1

Growth rates (per cent):Taxation …………………………………………… 7.5 5.8 4.5 -0.6 10.2 5.5 11.4 4.0 3.9 3.4 n/a Natural resources ………………………………… 3.1 3.1 -12.1 19.5 -0.6 -12.5 5.4 -11.0 -6.8 -1.8 n/a Other ……………………………………………… 4.0 5.8 3.3 10.4 -1.6 9.4 5.9 -4.4 -9.4 0.8 n/a Contributions from the federal government …… 15.6 -3.6 -8.8 6.6 -3.1 5.1 6.8 2.5 2.3 2.0 n/a Commercial Crown corporation net income … -3.1 -8.5 3.2 -2.7 24.8 -19.6 -6.8 17.2 -0.4 -2.4 n/a

Total revenue ……………………………… 7.1 2.8 0.6 3.9 5.5 3.3 8.1 1.8 0.3 2.1 n/a

Per capita ($): 2

Taxation …………………………………………… 4,262 4,478 4,630 4,561 4,963 5,184 5,702 5,863 6,024 6,155 4.2Natural resources ………………………………… 611 625 544 644 632 548 571 502 463 449 -3.4Other ……………………………………………… 1,785 1,874 1,916 2,096 2,036 2,205 2,307 2,181 1,954 1,946 1.0Contributions from the federal government …… 1,793 1,717 1,550 1,637 1,567 1,629 1,719 1,742 1,761 1,776 -0.1Commercial Crown corporation net income … 658 598 611 589 726 577 531 616 606 585 -1.3

Total revenue ……………………………… 9,109 9,292 9,251 9,526 9,925 10,143 10,830 10,904 10,808 10,912 2.0

Real Per Capita Revenue (2016 $) 3 ……………… 9,797 9,762 9,612 9,907 10,217 10,329 10,830 10,685 10,368 10,259 0.5Growth rate (per cent) …………………………… 4.4 -0.4 -1.5 3.1 3.1 1.1 4.8 -1.3 -3.0 -1.1 0.9

1

2

3

Revenue as a per cent of GDP is calculated using nominal GDP for the calendar year ending in the fiscal year (e.g. 2017/18 revenue divided by nominal GDP for the 2017 calendar year).

Per capita revenue is calculated using July 1 population (e.g. 2017/18 revenue divided by population on July 1, 2017).

Revenue is converted to real (inflation-adjusted) terms using the consumer price index (CPI) for the corresponding calendar year (e.g. 2017 CPI for 2017/18 revenue).

124 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A11 Expense by Function – 2010/11 to 2019/20 1


Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Function: (per cent)Health:

Medical Services Plan ……………………… 3,641 3,873 3,906 4,114 4,136 4,345 4,573 4,768 4,924 5,022 3.6Pharmacare ………………………………… 1,129 1,147 1,122 1,130 1,120 1,335 1,284 1,347 1,382 1,421 2.6Regional services …………………………… 10,597 11,255 11,784 11,960 12,410 12,811 13,079 13,831 14,345 14,890 3.9Other healthcare expenses ………………… 625 642 690 658 704 712 753 801 815 817 3.0

15,992 16,917 17,502 17,862 18,370 19,203 19,689 20,747 21,466 22,150 3.7Education:

Elementary and secondary ………………… 5,802 5,885 6,002 6,133 6,064 6,303 6,422 6,935 7,064 7,105 2.3Post-secondary ……………………………… 4,859 4,907 5,103 5,284 5,349 5,502 5,672 6,094 6,250 6,421 3.1Other education expenses ………………… 504 436 423 410 414 407 374 347 347 344 -4.2

11,165 11,228 11,528 11,827 11,827 12,212 12,468 13,376 13,661 13,870 2.4Social services:

Social assistance …………………………… 1,506 1,550 1,552 1,572 1,589 1,641 1,692 1,985 2,105 2,134 4.0Child welfare ………………………………… 1,118 1,112 1,098 1,097 1,129 1,301 1,358 1,485 1,478 1,481 3.2Low income tax credit transfers …………… 408 509 534 279 248 247 244 250 250 250 -5.3Community living and other services ……… 754 769 806 857 881 917 949 1,025 1,098 1,115 4.4

3,786 3,940 3,990 3,805 3,847 4,106 4,243 4,745 4,931 4,981 3.1Protection of persons and property ………… 1,448 1,512 1,539 1,520 1,451 1,572 1,655 1,830 1,611 1,557 0.8Transportation ………………………………… 1,580 1,545 1,555 1,580 1,608 1,670 1,784 2,068 2,066 2,024 2.8Natural resources & economic development 2,349 1,873 2,092 1,755 2,191 2,477 2,504 2,720 2,252 2,291 -0.3Other …………………………………………… 1,208 1,414 1,346 1,184 1,288 1,264 2,260 1,635 1,526 1,545 2.8Contingencies ………………………………… - - - - - - - 600 300 350 n/a General government …………………………… 1,146 1,235 1,262 1,386 1,359 1,501 1,532 1,465 1,384 1,385 2.1Debt servicing ………………………………… 2,252 2,383 2,390 2,482 2,498 2,786 2,587 2,675 2,832 2,917 2.9

Operating expense ………………………… 40,926 42,047 43,204 43,401 44,439 46,791 48,722 51,861 52,029 53,070 2.9Unusual items:HST transition funding repayment …………… - 1,599 - - - - - - - -

Total expense ……………………………… 40,926 43,646 43,204 43,401 44,439 46,791 48,722 51,861 52,029 53,070 Per cent of operating expense:

Health …………………………………………… 39.1 40.2 40.5 41.2 41.3 41.0 40.4 40.0 41.3 41.7 0.7Education ……………………………………… 27.3 26.7 26.7 27.3 26.6 26.1 25.6 25.8 26.3 26.1 -0.5Social services and housing ………………… 9.3 9.4 9.2 8.8 8.7 8.8 8.7 9.2 9.5 9.4 0.2Protection of persons and property ………… 3.5 3.6 3.6 3.5 3.3 3.4 3.4 3.5 3.1 2.9 -2.1Transportation ………………………………… 3.9 3.7 3.6 3.6 3.6 3.6 3.7 4.0 4.0 3.8 -0.1Natural resources & economic development 5.7 4.5 4.8 4.0 4.9 5.3 5.1 5.2 4.3 4.3 -3.1Other …………………………………………… 3.0 3.4 3.1 2.7 2.9 2.7 4.6 3.2 2.9 2.9 -0.2Contingencies ………………………………… - - - - - - - 1.2 0.6 0.7 n/a General government …………………………… 2.8 2.9 2.9 3.2 3.1 3.2 3.1 2.8 2.7 2.6 -0.8Debt servicing ………………………………… 5.5 5.7 5.5 5.7 5.6 6.0 5.3 5.2 5.4 5.5 0.0

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

1 Figures reflect government accounting policies used in the 2016/17 Public Accounts audited financial statements.

Budget 2017 Update – 2017/18 to 2019/20

Appendix

125

Table A12 Expense by Function Supplementary Information – 2010/11 to 2019/20

Actual 2010/11

Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Per cent of nominal GDP: 1 (per cent)Health …………………………………………… 7.8 7.8 7.9 7.8 7.6 7.7 7.5 7.5 7.5 7.4 -0.6Education ……………………………………… 5.4 5.2 5.2 5.2 4.9 4.9 4.7 4.8 4.8 4.6 -1.8Social services ………………………………… 1.8 1.8 1.8 1.7 1.6 1.6 1.6 1.7 1.7 1.7 -1.1Protection of persons and property ………… 0.7 0.7 0.7 0.7 0.6 0.6 0.6 0.7 0.6 0.5 -3.3Transportation ………………………………… 0.8 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 -1.4Natural resources & economic development 1.1 0.9 0.9 0.8 0.9 1.0 1.0 1.0 0.8 0.8 -4.4Other …………………………………………… 0.6 0.7 0.6 0.5 0.5 0.5 0.9 0.6 0.5 0.5 -1.4Contingencies ………………………………… - - - - - - - 0.2 0.1 0.1 n/a General government …………………………… 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.5 0.5 0.5 -2.1Debt servicing ………………………………… 1.1 1.1 1.1 1.1 1.0 1.1 1.0 1.0 1.0 1.0 -1.3

Operating expense ………………………… 20.0 19.4 19.5 19.0 18.4 18.7 18.5 18.8 18.1 17.7 -1.3

Growth rates (per cent):Health …………………………………………… 4.3 5.8 3.5 2.1 2.8 4.5 2.5 5.4 3.5 3.2 n/a Education ……………………………………… 1.2 0.6 2.7 2.6 0.0 3.3 2.1 7.3 2.1 1.5 n/a Social services ………………………………… 8.9 4.1 1.3 -4.6 1.1 6.7 3.3 11.8 3.9 1.0 n/a Protection of persons and property ………… 4.9 4.4 1.8 -1.2 -4.5 8.3 5.3 10.6 -12.0 -3.4 n/a Transportation ………………………………… 8.7 -2.2 0.6 1.6 1.8 3.9 6.8 15.9 -0.1 -2.0 n/a Natural resources & economic development 8.8 -20.3 11.7 -16.1 24.8 13.1 1.1 8.6 -17.2 1.7 n/a Other …………………………………………… -12.6 17.1 -4.8 -12.0 8.8 -1.9 78.8 -27.7 -6.7 1.2 n/a General government …………………………… -16.7 7.8 2.2 9.8 -1.9 10.4 2.1 -4.4 -5.5 0.1 n/a Debt servicing ………………………………… 2.5 5.8 0.3 3.8 0.6 11.5 -7.1 3.4 5.9 3.0 n/a

Operating expense ………………………… 2.9 2.7 2.8 0.5 2.4 5.3 4.1 6.4 0.3 2.0 n/a

Per capita ($): 2

Health …………………………………………… 3,581 3,760 3,850 3,892 3,955 4,092 4,144 4,317 4,414 4,503 2.6Education ……………………………………… 2,500 2,496 2,536 2,577 2,546 2,602 2,624 2,783 2,809 2,820 1.3Social services ………………………………… 848 876 878 829 828 875 893 987 1,014 1,013 2.0Protection of persons and property ………… 324 336 339 331 312 335 348 381 331 317 -0.2Transportation ………………………………… 354 343 342 344 346 356 375 430 425 411 1.7Natural resources & economic development 526 416 460 382 472 528 527 566 463 466 -1.3Other …………………………………………… 270 314 296 258 277 269 476 340 314 314 1.7Contingencies ………………………………… - - - - - - - 125 62 71 n/a General government …………………………… 257 274 278 302 293 320 322 305 285 282 1.0Debt servicing ………………………………… 504 530 526 541 538 594 544 557 582 593 1.8

Operating expense ………………………… 9,164 9,345 9,505 9,456 9,567 9,971 10,253 10,791 10,699 10,790 1.8

Real Per Capita Operating Expense (2016 $) 3 9,857 9,819 9,874 9,835 9,848 10,153 10,254 10,574 10,264 10,143 0.3

Growth rate (per cent) ………………………… 0.2 -0.4 0.6 -0.4 0.1 3.1 1.0 3.1 -2.9 -1.2 0.3

1

2

3

Expense as a per cent of GDP is calculated using nominal GDP for the calendar year ending in the fiscal year (e.g. 2017/18 expense divided by nominal GDP for the 2017 calendar year).

Per capita expense is calculated using July 1 population (e.g. 2017/18 expense divided by population on July 1, 2017).

Expense is converted to real (inflation-adjusted) terms using the consumer price index (CPI) for the corresponding calendar year (e.g. 2017 CPI for 2017/18 expense).

126 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A13 Full-Time Equivalents (FTEs) – 2010/11 to 2019/20 1

Actual 2010/11

Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Taxpayer-supported programs and agencies: (per cent)

Ministries and special offices (CRF) 2 ……… 30,221 27,228 27,326 26,526 26,679 27,192 27,940 28,600 28,630 28,660 -0.6Service delivery agencies 3 …………….....… 4,295 4,346 4,508 4,640 4,798 4,803 4,850 4,918 4,921 4,676 0.9

Total FTEs ………………………………… 34,516 31,574 31,834 31,166 31,477 31,995 32,790 33,518 33,551 33,336 -0.4

Growth rates (per cent):Ministries and special offices (CRF) ………… -3.6 -9.9 0.4 -2.9 0.6 1.9 2.8 2.4 0.1 0.1 -0.8Service delivery agencies …………….....…. -4.7 1.2 3.7 2.9 3.4 0.1 1.0 1.4 0.1 -5.0 0.4

Population per FTE: 4

Total FTEs …………………………………… 129.4 142.5 142.8 147.2 147.6 146.7 144.9 143.4 144.9 147.6 1.5

1

2

3 Service delivery agency FTE amounts do not include SUCH sector staff employment.4

Population per FTE is calculated using July 1 population (e.g. population on July 1, 2017 divided by 2017/18 FTEs).

Full-time equivalents (FTEs) are a measure of staff employment. FTEs are calculated by dividing the total hours of employment paid for in a given period by the number of hours an individual, full-time person would normally work in that period. This does not equate to the physical number of employees. For example, two half-time employees would equal one FTE, or alternatively, three FTEs may represent two full-time employees who have worked sufficient overtime hours to equal an additional FTE.

The ministry 2011/12 FTE total includes a reduction of about 3,200 FTEs reflecting the shift of BC Ambulance Service oversight from the Ministry of Health to the Provincial Health Services Authority.

Budget 2017 Update – 2017/18 to 2019/20

Appendix

127

Table A14 Capital Spending – 2010/11 to 2019/20


Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Taxpayer-supported: (per cent)Education

Schools districts …………………………… 433 560 509 466 420 430 474 635 687 629 4.2Post-secondary institutions ………………… 924 655 591 507 718 746 792 897 831 857 -0.8

Health …………………………………………… 916 732 742 690 900 923 1,004 1,218 1,037 854 -0.8BC Transportation Financing Authority 1……… 1,080 921 1,005 1,017 822 867 823 1,169 1,283 1,676 5.0BC Transit ……………………………………… 39 37 48 80 83 51 41 152 136 127 14.0Vancouver Convention Centre expansion …… 10 1 - - - - - - - - n/a BC Place redevelopment ……………………… 197 194 6 - - - - - - - n/a Government direct (ministries) ………………… 261 245 267 298 326 290 301 515 451 448 6.2Housing ………………………………………… 230 196 92 65 107 127 184 303 361 183 -2.5Other 2…………………………………………… 20 24 19 28 31 25 40 67 69 40 8.0

4,110 3,565 3,279 3,151 3,407 3,459 3,659 4,956 4,855 4,814 1.8Self-supported:

BC Hydro ………………………………………… 1,519 1,703 1,929 2,036 2,169 2,306 2,444 2,421 2,434 2,961 7.7Columbia River power projects ………………… 67 108 94 52 28 15 2 13 7 18 -13.6Transportation Investment Corporation 1.…… 730 734 540 202 76 25 38 - - - -100.0BC Railway Company ………………………… 6 9 10 8 5 23 4 34 20 3 -7.4ICBC ……………………………………………… 48 92 73 82 88 90 62 60 40 40 -2.0BC Lottery Corporation ………………………… 81 74 97 100 69 68 86 90 105 105 2.9Liquor Distribution Branch ……………………… 18 19 10 13 25 23 27 83 29 27 4.6Other 3 ............................................................ 1 5 12 26 28 23 62 - - - n/a

2,470 2,744 2,765 2,519 2,488 2,573 2,725 2,701 2,635 3,154 2.8Total capital spending …………………… 6,580 6,309 6,044 5,670 5,895 6,032 6,384 7,657 7,490 7,968 2.1

Per cent of nominal GDP: 4

Taxpayer-supported …………………………… 2.0 1.6 1.5 1.4 1.4 1.4 1.4 1.8 1.7 1.6 -2.4Self-supported …………………………………… 1.2 1.3 1.2 1.1 1.0 1.0 1.0 1.0 0.9 1.1 -1.5

Total ………………………………………… 3.2 2.9 2.7 2.5 2.4 2.4 2.4 2.8 2.6 2.7 -2.0Growth rates:

Taxpayer-supported …………………………… 10.5 -13.3 -8.0 -3.9 8.1 1.5 5.8 35.4 -2.0 -0.8 3.3Self-supported …………………………………… -26.5 11.1 0.8 -8.9 -1.2 3.4 5.9 -0.9 -2.4 19.7 0.1

Total ………………………………………… -7.1 -4.1 -4.2 -6.2 4.0 2.3 5.8 19.9 -2.2 6.4 1.5Per capita: 5

Taxpayer-supported …………………………… 920 792 721 687 733 737 770 1,031 998 979 0.7Self-supported …………………………………… 553 610 608 549 536 548 573 562 542 641 1.7

Total ………………………………………… 1,473 1,402 1,329 1,236 1,269 1,285 1,344 1,593 1,540 1,620 1.1

Real Per Capita Capital Spending (2016 $) 6 … 1,585 1,473 1,381 1,285 1,306 1,309 1,344 1,561 1,478 1,523 -0.4

Growth rate (per cent) ………………………… -9.4 -7.0 -6.2 -7.0 1.7 0.2 2.7 16.2 -5.4 3.1 -1.1

1

2

3

4

5

6

Capital spending as a per cent of GDP is calculated using nominal GDP for the calendar year ending in the fiscal year (e.g. 2017/18 amounts divided by nominal GDP for the 2017 calendar year). Per capita capital spending is calculated using July 1 population (e.g. 2017/18 amounts divided by population on July 1, 2017).

Includes post-secondary institutions' self-supported subsidiaries.

Capital spending is converted to real (inflation-adjusted) terms using the consumer price index (CPI) for the corresponding calendar year (e.g. 2017 CPI for 2017/18 capital spending).

Includes Transportation Investment Plan capital spending and, begining in 2017/18, Tranportation Investment Corporation rehabilitation costs for the Port Mann bridge due to reclassification from self-supported commercial Crown corporation to a taxpayer-supported agency in response to the cancellation of tolls.

Includes BC Pavilion Corporation and other service delivery agencies.

128 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A15 Statement of Financial Position – 2010/11 to 2019/20


Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Financial assets: (per cent)Cash and temporary investments …………… 3,060 3,235 3,173 2,801 3,675 3,892 4,232 2,994 2,582 2,425 -2.6Other financial assets ………………………… 7,990 7,938 8,186 9,336 9,121 9,643 10,260 10,567 10,945 11,199 3.8Sinking funds ............................................... 1,410 1,491 1,778 835 977 1,580 1,087 1,107 556 484 -11.2Investments in commercial Crown corporations:

Retained earnings ………………………… 7,092 6,998 7,541 7,839 8,271 7,531 7,511 8,338 8,932 9,289 3.0Recoverable capital loans ………………… 13,142 15,167 17,208 19,255 20,624 22,074 23,848 20,819 21,721 22,993 6.4

20,234 22,165 24,749 27,094 28,895 29,605 31,359 29,157 30,653 32,282 5.332,694 34,829 37,886 40,066 42,668 44,720 46,938 43,825 44,736 46,390 4.0

Liabilities:Accounts payable & accrued liabilities ……… 7,919 9,119 9,149 8,298 8,312 8,486 8,937 9,633 9,767 10,123 2.8Deferred revenue ……………………………… 10,749 10,449 9,864 9,697 9,807 9,779 9,661 10,046 10,369 10,998 0.3Debt:

Taxpayer-supported debt ………… 31,821 34,659 38,182 41,068 41,880 42,727 41,506 44,853 47,031 48,642 4.8Self-supported debt ……………… 13,333 15,534 17,634 19,625 21,040 22,565 24,377 21,624 22,509 23,764 6.6Forecast allowance ……………… - - - - - - - 300 300 350 n/a

Total provincial debt ……………………… 45,154 50,193 55,816 60,693 62,920 65,292 65,883 66,777 69,840 72,756 5.4Add: debt offset by sinking funds ……… 1,410 1,491 1,778 835 977 1,580 1,087 1,107 556 484 -11.2Less: guarantees and

non-guaranteed debt ……………… (455) (730) (755) (726) (739) (820) (835) (819) (801) (786) 6.3Financial statement debt .............................. 46,109 50,954 56,839 60,802 63,158 66,052 66,135 67,065 69,595 72,454 5.1

64,777 70,522 75,852 78,797 81,277 84,317 84,733 86,744 89,731 93,575 4.2Net liabilities ……………………………………… (32,083) (35,693) (37,966) (38,731) (38,609) (39,597) (37,795) (42,919) (44,995) (47,185) 4.4Capital and other assets:

Tangible capital assets ………………………… 34,278 35,692 36,762 37,778 39,028 40,282 41,303 46,923 49,445 51,880 4.7Restricted assets ……………………………… 1,312 1,377 1,442 1,493 1,553 1,631 1,695 1,750 1,804 1,858 3.9Other assets …………………………………… 891 894 966 1,307 1,281 1,101 1,187 874 874 873 -0.2

36,481 37,963 39,170 40,578 41,862 43,014 44,185 49,547 52,123 54,611 4.6

Accumulated surplus (deficit) ………………… 4,398 2,270 1,204 1,847 3,253 3,417 6,390 6,628 7,128 7,426 6.0

Per cent of Nominal GDP: 1

Net liabilities …………………………………… 15.6 16.5 17.1 16.9 16.0 15.8 14.4 15.5 15.6 15.8 0.1Capital and other assets ……………………… 17.8 17.5 17.7 17.7 17.4 17.2 16.8 17.9 18.1 18.3 0.3

Growth rates (per cent):Net liabilities …………………………………… 8.8 11.3 6.4 2.0 -0.3 2.6 -4.6 13.6 4.8 4.9 4.9Capital and other assets ……………………… 6.6 4.1 3.2 3.6 3.2 2.8 2.7 12.1 5.2 4.8 4.8

Per capita: 2

Net liabilities …………………………………… 7,184 7,933 8,351 8,440 8,311 8,438 7,954 8,930 9,253 9,593 3.3Capital and other assets ……………………… 8,169 8,438 8,616 8,842 9,012 9,166 9,299 10,309 10,719 11,102 3.5

1

2Per capita net liabilities is calculated using July 1 population (e.g. 2017/18 amount divided by population on July 1, 2017).

Net liabilities as a per cent of GDP is calculated using GDP for the calendar year ending in the fiscal year (e.g. 2017/18 amount divided by GDP for the 2017 calendar year).

Budget 2017 Update – 2017/18 to 2019/20

Appendix

129

Table A16 Changes in Financial Position – 2010/11 to 2019/20


Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20

10-Year Total

(Surplus) deficit for the year …………………… 246 1,841 1,147 (316) (1,664) (811) (2,737) (246) (228) (257) (3,025) Comprehensive income (increase) decrease 96 287 (81) (327) 258 647 (236) 8 (272) (41) 339

Change in accumulated (surplus) deficit …… 342 2,128 1,066 (643) (1,406) (164) (2,973) (238) (500) (298) (2,686)

Capital and other asset changes:Taxpayer-supported capital investments …… 4,110 3,565 3,279 3,151 3,407 3,459 3,659 4,956 4,855 4,814 39,255

Less: amortization and otheraccounting changes ……………… (2,051) (2,151) (2,209) (2,135) (2,157) (2,205) (2,638) 664 (2,333) (2,379) (19,594)

Increase in net capital assets ................. 2,059 1,414 1,070 1,016 1,250 1,254 1,021 5,620 2,522 2,435 19,661 Increase (decrease) in restricted assets ....... 71 65 65 51 60 78 64 55 54 54 617 Increase (decrease) in other assets ............. 120 3 72 341 (26) (180) 86 (313) - (1) 102

2,250 1,482 1,207 1,408 1,284 1,152 1,171 5,362 2,576 2,488 20,380

Increase (decrease) in net liabilities ............. 2,592 3,610 2,273 765 (122) 988 (1,802) 5,124 2,076 2,190 17,694

Investment and working capital changes:Increase (decrease) in cash and

temporary investments …………………… 149 175 (62) (372) 874 217 340 (1,238) (412) (157) (486) Increase (decrease) in warehouse

borrowing investments …………………… - - - - - - - - - - - Investment in commercial Crown corporations:

Increase (decrease) in retained earnings (366) (94) 543 298 432 (740) (20) 827 594 357 1,831 Self-supported capital investments ……… 2,470 2,744 2,765 2,519 2,488 2,573 2,725 2,701 2,635 3,154 26,774 Less: loan repayments and

other accounting changes ………… (924) (719) (724) (472) (1,119) (1,123) (951) (5,730) (1,733) (1,882) (15,377) 1,180 1,931 2,584 2,345 1,801 710 1,754 (2,202) 1,496 1,629 13,228

Other working capital changes ……………… (480) (871) 1,090 1,225 (197) 979 (209) (754) (630) (803) (650) 849 1,235 3,612 3,198 2,478 1,906 1,885 (4,194) 454 669 12,092

Increase (decrease) in financial statement debt ……………………………………………… 3,441 4,845 5,885 3,963 2,356 2,894 83 930 2,530 2,859 29,786 (Increase) decrease in sinking fund debt …… (81) (81) (287) 943 (142) (603) 493 (20) 551 72 845 Increase (decrease) in guarantees 39 99 (34) 27 (33) 6 (23) (292) (1) 2 (210) Increase (decrease) in non-guaranteed debt (130) 176 59 (56) 46 75 38 276 (17) (17) 450

Increase (decrease) in total provincial debt … 3,269 5,039 5,623 4,877 2,227 2,372 591 894 3,063 2,916 30,871 Represented by increase (decrease) in:

Taxpayer-supported debt ……… 1,853 2,838 3,523 2,886 812 847 (1,221) 3,347 2,178 1,611 18,674 Self-supported debt ……………… 1,416 2,201 2,100 1,991 1,415 1,525 1,812 (2,753) 885 1,255 11,847 Forecast allowance ……………… - - - - - - - 300 - 50 350

Total provincial debt …………… 3,269 5,039 5,623 4,877 2,227 2,372 591 894 3,063 2,916 30,871

130 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A17 Provincial Debt – 2010/11 to 2019/20


Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Taxpayer-supported debt: (per cent)Provincial government direct operating … 6,964 7,813 9,408 10,223 9,280 8,034 4,644 1,573 249 - -100.0

Other taxpayer-supported debt (mainly capital):Education facilities

Post-secondary institutions ……………… 4,092 4,185 4,315 4,386 4,518 4,731 4,984 5,395 5,712 5,710 3.8School districts …………………………… 6,016 6,407 6,830 7,245 7,600 8,033 8,473 8,935 9,568 9,393 5.1

10,108 10,592 11,145 11,631 12,118 12,764 13,457 14,330 15,280 15,103 4.6Health facilities ………………………………… 4,895 5,293 5,691 6,038 6,522 6,998 7,552 8,014 8,642 8,659 6.5Highways, ferries and public transit

BC Transit …………………….................. 158 183 163 143 123 106 94 77 66 113 -3.7BC Transportation Financing Authority … 5,785 6,287 7,084 7,912 8,428 9,185 9,981 11,038 12,290 13,801 10.1Port Mann Bridge 1 ………………………… - - - - - - - 3,505 3,505 3,505 n/a Public transit ……………………………… 997 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 0.0SkyTrain extension ……………………… 1,155 1,174 1,174 1,174 1,174 1,174 1,174 1,174 1,174 1,174 0.2

8,095 8,644 9,421 10,229 10,725 11,465 12,249 16,794 18,035 19,593 10.3Other

BC Immigrant Investment Fund ………… 347 398 363 440 414 304 217 157 88 70 -16.3BC Pavilion Corporation ………………… 250 383 383 382 381 389 376 389 397 404 5.5Provincial government general capital … 570 808 1,073 1,372 1,698 1,987 2,288 2,669 3,052 3,328 21.7Social Housing …………………………… 511 674 658 719 715 760 695 900 1,260 1,457 12.3Other ………………………………………… 81 54 40 34 27 26 28 27 28 28 -11.1

1,759 2,317 2,517 2,947 3,235 3,466 3,604 4,142 4,825 5,287 13.0Total other taxpayer-supported debt ……… 24,857 26,846 28,774 30,845 32,600 34,693 36,862 43,280 46,782 48,642 7.7

Total taxpayer-supported debt ………………… 31,821 34,659 38,182 41,068 41,880 42,727 41,506 44,853 47,031 48,642 4.8

Self-supported debt:Commercial Crown corporations and agencies

BC Hydro …………………………………… 11,710 12,978 14,167 15,559 16,544 17,928 19,692 20,365 21,233 22,490 7.5BC Lotteries ………………………………… 85 90 132 155 140 150 145 145 167 188 9.2Columbia Power Corporation …………… - - - - 300 296 291 286 281 275 n/a Columbia River power projects ………… 183 481 475 470 464 459 448 433 417 400 9.1Post-secondary institution subsidiaries … 173 173 215 198 222 310 340 340 340 340 7.8Transportation Investment Corporation 1 1,148 1,779 2,610 3,209 3,335 3,389 3,430 - - - n/a Other………………………………………… 34 33 35 34 35 33 31 55 71 71 8.5

Total self-supported debt ……………………… 13,333 15,534 17,634 19,625 21,040 22,565 24,377 21,624 22,509 23,764 6.6Forecast allowance ……………………………… - - - - - - - 300 300 350 n/a Total provincial debt …………………………… 45,154 50,193 55,816 60,693 62,920 65,292 65,883 66,777 69,840 72,756 5.4

1Beginning in 2017/18, debt related to the Port Mann Bridge has been reclassified as taxpayer-supported due to the elimination of tolls effective September 1, 2017.

Budget 2017 Update – 2017/18 to 2019/20

Appendix

131

Table A18 Provincial Debt Supplementary Information – 2010/11 to 2019/20 1


Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Per cent of nominal GDP: 2 (per cent)Taxpayer-supported debt:Provincial government direct operating ……… 3.4 3.6 4.2 4.5 3.9 3.2 1.8 0.6 0.1 - -100.0Education facilities …………………………… 4.9 4.9 5.0 5.1 5.0 5.1 5.1 5.2 5.3 5.1 0.3Health facilities ………………………………… 2.4 2.4 2.6 2.6 2.7 2.8 2.9 2.9 3.0 2.9 2.2Highways, ferries and public transit ………… 3.9 4.0 4.3 4.5 4.5 4.6 4.7 6.1 6.3 6.6 5.8Other …………………………………………… 0.9 1.1 1.1 1.3 1.3 1.4 1.4 1.5 1.7 1.8 8.4

Total taxpayer-supported debt …………… 15.5 16.0 17.2 17.9 17.4 17.1 15.8 16.2 16.4 16.3 0.5Self-supported debt:Commercial Crown corporations & agencies 6.5 7.2 8.0 8.6 8.7 9.0 9.3 7.8 7.8 7.9 2.3

Total provincial debt …………………… 22.0 23.2 25.2 26.5 26.1 26.1 25.1 24.2 24.3 24.3 1.1Growth rates (per cent):

Taxpayer-supported debt:Provincial government direct operating ……… -5.4 12.2 20.4 8.7 -9.2 -13.4 -42.2 -66.1 -84.2 -100.0 -27.9Education facilities …………………………… 5.3 4.8 5.2 4.4 4.2 5.3 5.4 6.5 6.6 -1.2 4.7Health facilities ………………………………… 11.5 8.1 7.5 6.1 8.0 7.3 7.9 6.1 7.8 0.2 7.1Highways, ferries and public transit ………… 7.9 6.8 9.0 8.6 4.8 6.9 6.8 37.1 7.4 8.6 10.4Other …………………………………………… 57.5 31.7 8.6 17.1 9.8 7.1 4.0 14.9 16.5 9.6 17.7

Total taxpayer-supported debt …………… 6.2 8.9 10.2 7.6 2.0 2.0 -2.9 8.1 4.9 3.4 5.0Self-supported debt:Commercial Crown corporations & agencies 11.9 16.5 13.5 11.3 7.2 7.2 8.0 -11.3 4.1 5.6 7.4

Total provincial debt …………………… 7.8 11.2 11.2 8.7 3.7 3.8 0.9 1.4 4.6 4.2 5.7Per capita: 3

Taxpayer-supported debt:Provincial government direct operating ……… 1,559 1,737 2,069 2,228 1,998 1,712 977 327 51 - -100.0Education facilities …………………………… 2,263 2,354 2,451 2,535 2,609 2,720 2,832 2,981 3,142 3,070 3.4Health facilities ………………………………… 1,096 1,176 1,252 1,316 1,404 1,491 1,589 1,667 1,777 1,760 5.4Highways, ferries and public transit ………… 1,813 1,921 2,072 2,229 2,309 2,443 2,578 3,494 3,709 3,983 9.1Other …………………………………………… 394 515 554 642 696 739 758 862 992 1,075 11.8

Total taxpayer-supported debt …………… 7,125 7,703 8,398 8,949 9,016 9,105 8,735 9,332 9,672 9,889 3.7Self-supported debt:Commercial Crown corporations & agencies 2,985 3,453 3,879 4,276 4,529 4,808 5,130 4,499 4,629 4,831 5.5

Total provincial debt …………………… 10,111 11,156 12,277 13,226 13,545 13,913 13,865 13,893 14,362 14,791 4.3Real Per Capita Provincial Debt (2016 $) 4 …… 10,875 11,721 12,757 13,754 13,944 14,167 13,865 13,615 13,777 13,905 2.8

Growth rate (per cent) ………………………… 5.1 7.8 8.8 7.8 1.4 1.6 -2.1 -1.8 1.2 0.9 3.11

2

3

4

Numbers may not add due to rounding.

Per capita debt is calculated using July 1 population (e.g. 2017/18 debt divided by population on July 1, 2017).

Debt is converted to real (inflation-adjusted) terms using the consumer price index (CPI) for the corresponding calendar year (e.g. 2017 CPI for 2017/18 debt).

Debt as a per cent of GDP is calculated using nominal GDP for the calendar year ending in the fiscal year (e.g. 2017/18 debt divided by nominal GDP for the 2017 calendar year).

132 Appendix

Budget 2017 Update – 2017/18 to 2019/20

Table A19 Key Provincial Debt Indicators – 2010/11 to 2019/20

Actual 2010/11

Actual 2011/12

Actual 2012/13

Actual 2013/14

Actual 2014/15

Actual 2015/16

Actual 2016/17


Plan 2018/19

Plan 2019/20


Debt to revenue (per cent) (per cent)Total provincial ..........………………………… 88.5 94.7 104.1 107.8 106.7 106.0 99.3 98.6 101.9 103.6 1.8Taxpayer-supported .....……………………… 78.8 85.1 93.6 96.4 94.1 91.3 81.8 87.8 91.7 93.0 1.9

Debt per capita ($) 1

Total provincial ..........………………………… 10,111 11,156 12,277 13,226 13,545 13,913 13,865 13,893 14,362 14,791 4.3Taxpayer-supported .....……………………… 7,125 7,703 8,398 8,949 9,016 9,105 8,735 9,332 9,672 9,889 3.7

Debt to nominal GDP (per cent) 2

Total provincial ..........………………………… 22.0 23.2 25.2 26.5 26.1 26.1 25.1 24.2 24.3 24.3 1.1Taxpayer-supported .....……………………… 15.5 16.0 17.2 17.9 17.4 17.1 15.8 16.2 16.4 16.3 0.5

Interest bite (cents per dollar of revenue) 3

Total provincial ..........………………………… 4.2 4.3 4.4 4.3 4.3 4.7 3.8 3.8 4.1 4.1 -0.2Taxpayer-supported .....……………………… 4.0 4.0 3.9 3.7 3.7 4.0 3.2 3.5 3.8 3.9 -0.3

Interest costs ($ millions)Total provincial ..........………………………… 2,155 2,300 2,339 2,443 2,529 2,878 2,520 2,600 2,844 2,911 3.4Taxpayer-supported .....……………………… 1,596 1,625 1,600 1,582 1,655 1,891 1,643 1,769 1,925 2,018 2.6

Interest rate (per cent) 4

Taxpayer-supported .....……………………… 5.2 4.9 4.4 4.0 4.0 4.5 3.9 4.1 4.2 4.2 -2.2

Background Information:Revenue ($ millions)

Total provincial 5 ............……………………… 51,041 53,001 53,637 56,280 58,960 61,589 66,343 67,720 68,538 70,257 3.6

Taxpayer-supported 6 ..……………………… 40,391 40,742 40,775 42,612 44,522 46,805 50,735 51,066 51,262 52,298 2.9Debt ($ millions)

Total provincial ..............……………………… 45,154 50,193 55,816 60,693 62,920 65,292 65,883 66,777 69,840 72,756 5.4

Taxpayer-supported 7 ..……………………… 31,821 34,659 38,182 41,068 41,880 42,727 41,506 44,853 47,031 48,642 4.8

Provincial nominal GDP ($ millions) 8 ..............… 205,117 216,786 221,414 228,973 240,900 249,981 262,851 276,168 287,594 299,059 4.3

Population (thousands at July 1) 9 .......………… 4,466 4,499 4,546 4,589 4,645 4,693 4,752 4,806 4,863 4,919 1.11

2

3 The ratio of interest costs (less sinking fund interest) to revenue. Figures include capitalized interest expense in order to provide a more comparable measure to outstanding debt. 4

5

6

7

8

9 Population at July 1st within the fiscal year (e.g. population at July 1, 2017 is used for the fiscal year ended March 31, 2018).

Excludes revenue of government enterprises, but includes dividends from enterprises paid to the consolidated revenue fund.

Includes revenue of the consolidated revenue fund (excluding dividends from enterprises) plus revenue of all government organizations and enterprises.

Nominal GDP for the calendar year ending in the fiscal year (e.g. nominal GDP for 2017 is used for the fiscal year ended March 31, 2018).

The ratio of debt to population (e.g. 2017/18 debt divided by population at July 1, 2017).

Weighted average of all outstanding debt issues.

The ratio of debt outstanding at fiscal year end to provincial nominal gross domestic product (GDP) for the calendar year ending in the fiscal year (e.g. 2017/18 debt divided by 2017 nominal GDP).

Excludes debt of commercial Crown corporations and agencies and funds held under the province's warehouse borrowing program.

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Budget and Fiscal Plan - Budget 2017 September Update › 2017_Sept_Update › bfp › 2017... · 2017-09-08 · B September 11, 2017 As required by Section 7(1)(d) of the Budget